Exhibit 10.83


 


SOUTHERN IOWA GAMING CONTRACT


 
















 


ASSET PURCHASE AND SALE AGREEMENT


 


THIS
ASSET PURCHASE AND SALE AGREEMENT (this “Agreement”) is made and entered into
as of the Twentieth day of July, 2004 (“Effective Date”), by and between
Southern Iowa Gaming Co., an Iowa Corporation (“Seller”) and Herbst Gaming,
Inc., a Nevada corporation, or its permitted designee (“Buyer”).


 


WHEREAS,
subject to the terms and conditions set forth in this Agreement, Seller desires
to sell, transfer, assign and convey to Buyer, and Buyer desires to purchase
and acquire from Seller, the operating assets of Seller used in connection with
Seller’s gaming excursion riverboat business (the “Business”) berthed in
Osceola, Iowa; and


 


NOW,
THEREFORE, in consideration of the mutual covenants and agreements contained
herein and for other good and valuable consideration the receipt and
sufficiency of which hereby are acknowledged, Seller and Buyer hereby agree as
follows:


 


1.                                       Purchase and Sale. Subject to the terms and conditions set forth
in this Agreement, Seller hereby agrees to, or to cause certain of its
subsidiaries to, sell, transfer, assign and convey to Buyer, and Buyer hereby
agrees to purchase and acquire from Seller, all of the following (collectively,
the “Business Assets”):


 


(a)                                  The gaming excursion riverboat, the USS
Osceola, a documented vessel operating in Osceola, Iowa, together with all
fixtures and improvements located on or used in connection with the riverboat
(the “Osceola”);


 


(b)                                 That certain real estate located in Clarke
County, Iowa, more particularly described on Exhibit ”A” attached hereto,
generally located as graphically outlined on Exhibit “A-1” attached hereto,
including the improvements located thereon, together with all fixtures and
improvements located on or used in connection with the Business (the “Real
Estate”);


 


(c)                                  Subject to Seller obtaining such consents as
may be necessary, all assets of Clay Street Development Co., a wholly owned
subsidiary of Seller;


 


(d)                                 All cash on hand and in cage (as calculated
pursuant to Section 13.3, and including the amount of the Final Slot Drop
as (defined in Section 13.4)), plus a credit for the net liability
resulting from chips and tokens on hand (including table inventory, chips and
tokens in service and token-hoppers/reserves) and chips and tokens purchased,
as calculated pursuant to Section 13.2 (“Operating
Cash”), provided that (i) Operating


 
















 


Cash
on the Closing Date in excess of $2,500,000 shall be retained by Seller and,
(ii) in the event that Operating Cash on the Closing Date is less than
$2,500,000, Buyer shall be entitled to deduct the amount of such shortfall from
the Purchase Price.


 


(e)                                  All owned or leased  slots, video poker, video keno, wheel of
fortune and other video gaming devices, slot stands, black jack tables,
Caribbean Stud tables, roulette tables, crap tables, poker tables, keno, coin
counting and wrapping equipment, and all other gaming equipment and
paraphernalia used or held for use in the Business as itemized on attached
Schedule 1(e) (collectively the “Gaming Equipment”);


 


(f)                                    All tangible personal property used or held
for use in the operation of the Business, including, without limitation,
computer equipment, computer software to the extent owned or assignable under
existing arrangements (provided that, any such rights that are not assignable
are identified on Schedule 2 as “Excluded Assets,” and any obligations
associated therewith shall be deemed to be “Excluded Obligations”), and all
service equipment, kitchen equipment, decorations, china, glasswares, linens,
silverware, owned uniforms, furniture, furnishings and other equipment and
vehicles used or held for use in the Business (the “Personal Property”);


 


(g)                                 All inventories, including all food and
beverages, maintenance and housekeeping supplies, and other supplies of all
kinds, subject to such depletion and including such re-supplies as shall occur
and be made in the ordinary course of business (the “Inventories”);


 


(h)                                 All documents and books and records related
to the Business Assets or the operations of the Business, including, without
limitation, customer lists and player lists, casino files, copies of accounting
records and copies of financial statements (the “Records”);


 


(i)                                     All assignable rights and obligations under
any written or oral contracts, agreements, leases, instruments, or other
documents or commitments, arrangements, undertakings, practices or
authorizations related to the Business Assets or the operations of the
Business, except for the Excluded Obligations (collectively the “Contracts”),
including, without limitation, the Operating Agreement listed on
Schedule 1(i) attached hereto;


 


(j)                                     All intangible property owned or leased by
Seller required for the operation of the Business, including, without
limitation, goodwill, operating and training manuals, federal, state, and local
certifications and other permits (to the extent assignable), manuals and plans
relating to the Business or its operations, customer lists, supplier lists and
other documents relating to


 


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the
operation of the Business Assets, mailing lists used in the Business, and
trademarks and trade names used in the Business, (but specifically excluding
the name “Southern Iowa Gaming”, and the name “Grace” any derivative thereof or
any name which includes the word “Grace” or any derivative thereof) (the
“Intangibles”);


 


2.                                       Excluded Assets. Seller shall not sell, convey, transfer or
assign to Buyer, and Buyer shall not purchase or acquire from Seller, any of the
assets described below, a complete list of which is attached hereto as
Schedule 2 (the “Excluded Assets”), and Buyer shall not assume any
liability or obligation directly or indirectly related thereto:


 


(a)                                  The difference of (i) Operating Cash at
the time of Closing, less (ii) $2,500,000 (unless the amount of the
Operating Cash is less than $2,500,000, in which case Operating Cash shall be
an Excluded Asset);


 


(b)                                 All Seller’s cash, cash equivalents, bank
deposits and similar cash items of Seller or any affiliate of Seller at the
time of Closing which is not included in Operating Cash (as defined in
Section 1(d) above);


 


(c)                                  All income taxes refunds, accounts receivable
and intercompany loans payable or receivable, in each case for periods ending
on or prior to the Closing Date;


 


(d)                                 Seller’s corporate records, including, but
not limited to, Seller’s minute book, membership book, financial statements,
income tax returns, and any other record or document that does not relate to
the operational aspect of the Business but excluding the Records (the “Seller
Retained Records”);


 


(e)                                  All items of personal property owned by
guests, employees or other persons furnishing goods or services to the
Business;


 


(f)                                    Refunds, rebates or other claims, or any
interest thereon, for periods ending or events occurring on or prior to the
Closing Date or refunds, rebates or other claims arising from insurance
policies that are terminated by Seller as of the Closing Date;


 


(g)                                 All employee benefit plans of Seller
(collectively “Seller’s Plans”), including, but not limited to, any defined
contribution plan, employee welfare benefit plan, life insurance, death or
dismemberment benefit, hospital and physician benefit and medical, dental and
eye vision plans;


 


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(h)                                 The name “Southern Iowa Gaming”, the name
“Grace”, any derivative thereof or any name which includes the word “Grace” or
any derivative thereof; and


 


(i)                                     All other assets of Seller that are set forth
on the list of Excluded Assets attached hereto as Schedule 2.


 


3.                                       Purchase Price.  The
total purchase price that shall be paid by Buyer to Seller for the Business
Assets (the “Purchase Price”) shall be One Hundred and Eighty One Million Five
Hundred and Nineteen Thousand Three Hundred and Eighteen Dollars
($181,519,318.00), subject to adjustment based on (i) the provisions of
Section 1(d), (ii) the prorations set forth in Section 10.4,
(iii) the provisions of Sections 13.5, 13.6 and 13.7, and
(iv) the Closing Statements. On the Closing Date, the Purchase Price will
be paid in cash or by wire transfer of immediately available funds to an
account to be notified by Seller to Buyer not less than three (3) business days
prior to the Closing Date.


 


3.1                                 Deposit; Option to Deliver Letter of Credit
as Deposit.


 


(a)                                  On the Effective Date, Buyer shall deliver
cash in the amount of Six Million Three Hundred and Forty Eight Thousand
Dollars ($6,348,000) (the “Deposit”) to Lawyers Title of Arizona, 1850 North
Central Avenue, Suite 125, Phoenix, Arizona 85004-4590 (Attention: Sandy
Butler) (“Deposit Holder”).  Deposit
Holder shall invest the Deposit in an interest bearing escrow account (with
interest accruing thereon to the credit of the party hereto that ultimately
will receive the Deposit in accordance with the terms hereof) and shall
otherwise hold the Deposit in accordance with the provisions of this Agreement,
Sections 17.2(a) and (b), and
as set forth in the Deposit Escrow Agreement attached hereto as Exhibit “B” (the “Deposit Escrow  Agreement”).  Upon the Closing
hereunder, the Deposit, including all interest earned thereon, shall, at the
option of Buyer, either be applied to the Purchase Price or returned to Buyer.


 


(b)                                 Notwithstanding the
provisions of Section 3.1(a) above, Buyer may initially make the Deposit
by depositing an irrevocable letter of credit in the amount of the Deposit in
favor of the Deposit Holder (“Letter of Credit”) instead of depositing
cash.  The Letter of Credit shall be
issued by Bank of America, N.A., or a comparable bank or financial institution
acceptable to Seller in its sole discretion. 
The Letter of Credit shall be for a minimum term of thirteen (13)
months.  The Letter of Credit shall provide
that it may be drawn upon by written notice from the  Deposit Holder as provided
for in the Deposit Escrow Agreement. 
Upon any draw on the Letter of Credit, all proceeds therefrom shall be
paid to Deposit Holder and held by Deposit Holder in accordance with the terms of the
Deposit Escrow Agreement.  Buyer


 


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shall have the right to substitute cash at any time for all or part of
the Letter of Credit and thereby may obtain the release or reduction of the
Letter of Credit.  On the Closing Date,
or in the event of the termination of this Agreement by either party for any
reason other than those set forth in Section 17.2(a) or
(b), the Deposit Holder shall surrender the Letter of Credit to
Buyer, and Buyer shall be entitled to cancel the Letter of Credit.


 


3.2                                 Assumed Obligations.


 


a.                                       In addition to the payment of the Purchase
Price, subject to the following sentence, Buyer shall, as part of the Closing
and to the extent the benefits associated with such liabilities, obligations,
contracts, agreements and purchase orders are Business Assets, assume the
specific liabilities, obligations, contracts, agreements and purchase orders
related to the Business as set forth on Schedule 3.2 (collectively, the
“Assumed Obligations”). Buyer shall assume the Assumed Obligations only to the
extent arising or accruing from and after the Closing Date, and Buyer shall
have no duty or obligation whatsoever with respect to any duties or obligations
of Seller arising or accruing before the Closing Date (all of which shall be
the sole responsibility and liability of Seller). Notwithstanding any other
provisions in this Agreement to the contrary, Seller shall have no duty or
obligation whatsoever with respect to any duties or obligations of Buyer or the
Business arising or accruing under any Assumed Obligations after the Closing
Date (all of which shall be the sole responsibility and liability of Buyer).


 


b.                                      Subject to the terms and conditions of this
Agreement and to Seller’s obtaining any consents necessary for any assignments,
in accordance with the terms of this Agreement, Buyer and Seller shall execute
and deliver on the Closing Date an Assignment and Assumption Agreement in the
form of Exhibit ”C” attached
hereto and incorporated herein by this reference, (the “Assignment and
Assumption Agreement”), pursuant to which Buyer shall assume the Assumed
Obligations and Seller shall assign the Assumed Obligations.  On or prior to the Closing Date, Seller shall
use commercially reasonable efforts to obtain the necessary consents or
approvals required in connection with Seller’s assignment of the Assumed
Obligations, provided that Buyer hereby agrees, to the extent necessary, to
cooperate with Seller for such purpose. 
In the event any such consents are not obtained prior to the Closing
Date, Seller shall continue to use commercially reasonable efforts to obtain
the relevant consents until such consents are obtained, or until Buyer and
Seller reasonably agree that any such consent will not be obtainable, and 


 


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Seller
will cooperate with Buyer in any lawful and economically feasible arrangement
to provide that Buyer shall receive the interest of Seller in the benefits
associated with such Assumed Obligations, including performance by Seller, if
economically feasible, as agent; provided that Buyer shall undertake to pay or
satisfy the corresponding liabilities for the enjoyment of such benefit to the
extent Buyer would have been responsible therefor hereunder if such consents
had been obtained.


 


3.3                                 Excluded Obligations. Notwithstanding any other provision of this
Agreement to the contrary, except for the Assumed Obligations, Buyer shall not
assume or become obligated or liable with respect to any obligation of Seller
that is not set forth on Schedule 3.2, including, without limitation, the
following (collectively, the “Excluded Obligations”):


 


(a)                                  obligations and liabilities of Seller now
existing or that hereafter may exist with respect to any litigation of Seller,
whether or not described on Schedule 5.4;


 


(b)                                 obligations and liabilities accrued as of the
Closing Date to employees and former employees of Seller, including, without
limitation, any compensation, severance pay, accrued vacation time, personal
time, sick-leave time, salary, bonus, fringe benefits of any kind, welfare
benefits, pension benefits, and other benefits or claims, including, without
limitation, welfare payments and obligations under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended (“COBRA”);


 


(c)                                  obligations and liabilities of Seller
incurred in connection with or relating to the transfer of the Business Assets,
including, without limitation, state and local gaming fees and taxes, any
federal, state, or local transfer or other tax incurred by reason of such
transfer;


 


(d)                                 liabilities for federal, state, or local
income, sales or other taxes accruing prior to the Closing, including, without
limitation, any taxes due with respect to any period prior to the Closing as a
result of the imposition or enactment with retroactive effect of any increase
or change in the tax rates applicable to the Business or any of the Business
Assets (such as the New Gaming Legislation (as defined in
Section 5.5(a)));


 


(e)                                  obligations and liabilities of Seller
relating to workers compensation claims, liquor liability claims, employment
practices liability claims and all other claims of employees, agents or


 


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representatives
of Seller arising or relating to the period prior to the Closing Date; and


 


(f)                                    any other obligation or liability of Seller
arising or relating to the period before the Closing Date, other than the
Assumed Obligations.


 


3.4                                 Sales and Transfer Taxes; Gaming Taxes. Seller shall pay all state and local sales
and/or transfer taxes due as a result of the consummation of the sale of the
Business Assets.  Buyer shall be
responsible for and shall pay all gaming taxes related to operations of the
Business from and after the Closing, and shall indemnify and hold Seller
harmless from and against any such gaming taxes. Seller shall be responsible
for and shall pay all gaming taxes related to operations of the Business prior
to the Closing, and shall indemnify and hold Buyer harmless from and against
any such gaming taxes.  Buyer shall, at
the Closing hereunder, provide Seller with a reseller’s certification, or
similar documentation, as required by the State of Iowa and/or any other
jurisdiction imposing a sales or similar type tax on the Business, stating that
Buyer will be liable for such taxes on sales of Inventory occurring after the
Closing so that the Inventory may be sold to Buyer without application of any
sales tax.


 


3.5                                 Employees and Employee Benefits.


 


3.5.1                        Seller agrees that once Buyer has made the
Deposit, Buyer may interview Seller’s key employees and agents in accordance
with this Section 3.5.1. Access to employees and agents of Seller shall be
subject to reasonable notice by Buyer to Seller and the prior approval of Bruce
Schmitter, Seller’s Chief Operating Officer, or a person designated by Bruce
Schmitter to make such approval on behalf of Seller, which approval shall not
be withheld unreasonably.


 


3.5.2                        Buyer agrees that Buyer shall offer
employment commencing on the day after the Closing Date to at least that number
of Seller’s employees such that an insufficient number of employees will
experience an “employment loss” as defined in the U.S. Worker Adjustment and
Retraining Notification Act (“WARN”), as amended, 29 U.S.C. Section 2101,
et. seq., or similar Iowa law, and Seller will not have experienced a “plant
closing” or “mass layoff” as defined in the WARN Act or similar Iowa law, on
account of Buyer’s purchase of the Business Assets to trigger any 60 day notice
requirement under the WARN Act on or before the Closing Date. Buyer shall be
solely responsible and liable for providing any required notice of termination
to Seller’s employees and otherwise complying with the provisions of the WARN
Act or other applicable law.  Buyer
further agrees to retain Kevin Preston and Tom Timmons for a period of not less
than twelve (12) months from the Closing Date at the same base salaries and
other terms of


 


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employment as are in effect at the Effective Date or if they are not
retained for such period to compensate them as though they were so employed
unless they voluntarily terminate their employment or Buyer terminates their
employment for “cause.”


 


3.5.3                        Buyer agrees to the continuation of, or the
replacement with plans providing a comparable benefit to, Seller’s 401(k) plan,
medical, dental and eye vision plans and vacation policy for employees as
described on Schedule 3.5.3 for a period of not less than one (1) year
from the Closing Date.


 


3.6                                 Allocation of Purchase Price. 
Buyer and Seller acknowledge that the purchase and sale contemplated by
this Agreement constitutes an “applicable asset acquisition” within the meaning
of Section 1060(c) of the Internal Revenue Code of 1986, as amended (the
“Code”). The parties expressly agree that the Purchase Price shall be allocated
among the Business Assets as follows:


 


(a)                                  The parties agree that, unless they agree
otherwise as provided for in this Section 3.6,
(and subject to the provisions of Subsection 3.6(b)
below) the Purchase Price shall be allocated among the Business Assets as
follows: (i) the Purchase Price shall be allocated to the fixed assets of the
Business (i.e. the Osceola, the Real Estate, the Gaming Equipment, the Personal
Property) in an amount equal to the tax net book value of fixed assets, as
shown on the Seller’s books as of the Closing, (ii) the Purchase Price shall be
allocated to Inventory based on Seller’s cost, and (iii) the balance of the
Purchase Price shall be allocated to good will and/or to the other Intangibles.
Seller has notified Buyer that Seller believes that an allocation of the
Purchase Price among the Business Assets on this basis fairly reflects the
actual current fair market value of the respective assets and therefore
reflects an appropriate basis for allocating the Purchase Price under
Section 1060(c) of the Code.


 


(b)                                 Buyer shall have thirty (30) days after the
Effective Date of this Agreement to notify Seller at to whether it has any
objections to the proposed allocation of the Purchase Price, as reflected in
Subsection 3.6(a)  (the “Seller’s
Allocation”). Any such objection(s) shall be made in writing and shall specify
the nature of Buyer’s objection, the specific Business Assets affected by the
objection and the change in the Seller’s Allocation which Buyer proposes to
make.  If Buyer does not object to the
Seller’s Allocation within the said thirty (30) day period, then Seller and
Buyer shall prepare and timely file an IRS Form 8594 (the “Asset
Allocation Statement”) with each of their respective federal income tax returns
reflecting the Seller’s Allocation.  If
Buyer does timely object to the Seller’s Allocation, then Buyer and Seller
shall use good faith efforts to resolve any dispute with respect to the
Purchase Price allocation.  If within 15
days after delivery of Buyer’s objections to Seller,


 


8
















 


Seller
and Buyer are unable, in good faith, to reach such an agreement, Seller and
Buyer will each use their respective proposed allocation statements (with
Seller to use the Seller’s Allocation and Buyer to use the Seller’s Allocation,
as modified by its proposed changes). 
If, within 15 days after delivery of Buyer’s objections to Seller,
Seller and Buyer shall have agreed on an allocation, then Seller and Buyer
shall prepare and file an Adjusted Asset Allocation Statement in the form so
agreed and will act in accordance with the Adjusted Asset Allocation Statement
in the preparation, filing and audit of any Tax Return.


 


(c)                                  If an adjustment is made with respect to the
Purchase Price pursuant to Section 10.4 or 13.9, and such adjustment has
not been taken into account previously, then the Asset Allocation Statement
shall be adjusted in accordance with Section 1060 of the Code.  Purchaser and Seller agree to file any additional
information return required to be filed pursuant to Section 1060 of the
Code.


 


Neither
Buyer nor Seller will take a position inconsistent with the allocation of the
Purchase Price as determined pursuant to this Section 3.6; provided,
however, that, if the Internal Revenue Service takes a position with respect to
either Buyer or Seller that is inconsistent with such allocation, then either
Buyer or Seller, as the case may be, may take a protective position adopting
the Internal Revenue Service’s contention until the controversy has been
resolved.


 


3.7                                 Transfer Documents. On the Closing Date, Seller shall sell,
assign, transfer and convey the Business Assets to Buyer by deed, bill of sale,
assignments and such other applicable title transfer documents as may be
required to sell, assign, transfer and convey title thereto, or a valid and
subsisting leasehold estate in any Business Assets held under a lease. At the
Closing, Seller shall deliver to Buyer control and possession of all the
Business Assets.


 


4.                                       Buyer’s Approval of Condition of Business
Assets, Obligation to Pursue Licensing and Certain Other Matters.


 


4.1                                 Completion of Due Diligence. 
Buyer acknowledges that prior to the execution of this Agreement it has
had ample opportunity to review all of the Business Assets and to determine
their suitability for Buyer’s purposes, except for the Environmental Reports,
the Title Commitment and the Marine Survey called for in Sections
4.5, 4.6 and 4.7 . Buyer agrees that the only representations
and warranties being made by Seller with respect to the Business Assets and the
Business are those representations and warranties specifically set forth in
Section 5, and Buyer is not relying on any other representations and
warranties of Seller or any other person (including any


 


9
















 


representations
and warranties that may be implied, whether by law or otherwise) in entering
into this Agreement and in consummating the transactions contemplated hereby.


 


4.2                                 IRGC Approval.  Buyer covenants and agrees that it shall file
with the Iowa Racing and Gaming Commission (“IRGC”) an application for a
license to conduct gambling games on the Osceola gambling boat at Osceola, Iowa
(the “Application”) by not later than thirty (30) days after the Effective Date
of this Agreement.  Buyer agrees to
promptly provide any additional information required by the IRGC to process the
Application and to cooperate fully (and to cause its officers, directors and
employees and agents to cooperate fully) with all investigations being
performed by or on behalf of IRGC in connection with the Application.


 


4.3                                 Effect of Disapproval.  If
Buyer timely files its Application and uses its commercially reasonable efforts
to obtain IRGC approval, but IRGC nonetheless denies Buyer’s Application, or
Buyer withdraws the Application upon or after receiving advice from IRGC that
IRGC intends to deny Buyer’s Application (such withdrawal, a “Withdrawal in
Lieu of Denial”), then upon receipt of such denial or Withdrawal in Lieu of
Denial Buyer may terminate this Agreement and receive a return of the Deposit
and all interest, if any, accrued thereon. If (A) Buyer fails to provide any
information required by the IRGC to process its Application within a reasonable
amount of time after being requested to do so and/or Buyer or its officers,
directors, employees or agents fails to cooperate with the IRGC investigations
for the Application, or (B) Buyer voluntarily withdraws its Application (other
than a Withdrawal in Lieu of Denial), then Buyer shall be deemed to have not
used its commercially reasonable efforts to obtain IRGC approval, unless
Buyer’s failure to provide information or to cooperate, or Buyer’s withdrawal
(other than a Withdrawal in Lieu of Denial) results from Seller’s failure to
comply with the provisions of Section 7.2. 
Buyer agrees that in the event that it claims that a withdrawal is a
Withdrawal in Lieu of Denial, then Buyer shall waive any confidentiality
requirement with the IRGC in order to allow the Seller to confirm that the
withdrawal was a Withdrawal in Lieu of Denial.


 


4.4                                 Effect of MGC Disapproval.  The
parties acknowledge that pursuant to Section 36 below, Buyer must close
both this transaction and the transactions described in the St. Joseph
Agreement and the Mark Twain Casino Agreement (each as defined in
Section 36) simultaneously.  The
parties further acknowledge that both the St. Joseph Agreement and the Mark
Twain Casino Agreement must be approved by the Missouri Gaming Commission (the
“MGC”), which must approve both the sale of the assets described in those
Agreements to Buyer and the issuance of gaming licenses to Buyer (or Buyer’s
permitted designees, as the case may be), for the described locations


 


10
















 


(the
“MGC Approvals”).  Buyer agrees that it
will use its commercially reasonable efforts to obtain the MGC Approvals in the
same manner as it will seek IRGC approval of the Application.  If, however, the MGC fails to grant the MGC
Approvals (or any of them) in a manner that would permit Buyer to terminate the
St. Joseph Agreement and/or the Mark Twain Casino Agreement and receive a
return of its deposit made thereunder (i.e. on terms comparable to
Section 4.3 ), then Buyer may terminate this Agreement and receive a
return of its Deposit (even if it has received IRGC approval prior to such
time) unless the parties mutually agree to waive the requirement of
Section 36 that all three contracts must close simultaneously (in which
event each contract shall stand on its own).


 


4.5                                 Environmental Reports. 
Promptly after the execution of this Agreement, Seller shall obtain and
deliver to Buyer a Phase I Investigation (as defined in Section 7.9 above)
dated no earlier than the date that is 6 months prior to such delivery covering
all of the Real Estate.  If the Phase I
Investigation discloses any fact or circumstance that the Buyer or its lenders
reasonably believes requires additional investigation, then the provisions of
Section 7.9 shall control.


 


4.6                                 Title
Insurance.


 


(a)                                  On
the Closing Date, Seller shall, at Seller’s expense, cause to be issued and
delivered to Buyer a policy of title insurance (the “Title Policy”) respecting
the owned real property and the leased real property included in the Business
Assets and conforming to the following specifications:


 


(i)                                     The form of the
policy will be ALTA Owner’s Policy Form B 1970 (amended 10/17/70), or as to
leasehold estates, ALTA Leasehold Owner’s Policy – 1975, or the current
approved form for the jurisdiction in which the owned real property is located,
with an endorsement deleting any exclusion or exception for creditors’ rights;


 


(ii)                                  The policy will be
issued and underwritten by Lawyer’s Title Insurance Company (the “Title
Company”);


 


(iii)                               The insured will be
Buyer;


 


(iv)                              The policy will be in an
amount equal to that portion of the Purchase Price that is allocated to Real
Estate under Section 3.6 above;


 


(v)                                 The policy will be
dated concurrent with or subsequent to the Closing;


 


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(vi)                              There will be no
exceptions to coverage other than the Permitted Liens;


 


(vii)                           To the extent available in
the applicable jurisdiction, the policy shall contain a zoning endorsement in
the form of ALTA Form 3.1 (or the equivalent form in the applicable
jurisdiction) showing the zoning classification of the owned real property and
the leased real property and confirming that the current use of the owned real
property and the leased real property is in conformance with the applicable
zoning laws and use restrictions;


 


(viii)                        In the event that the portions
of the owned real property and/or the leased real property included in the
Business Assets and identified on Exhibit A-1 as non excess property consists
of more than one parcel, the policy shall contain an affirmative statement of
insurance to the effect that all parcels of land constituting such identified
real property are contiguous; and


 


(ix)                                The policy shall also
contain such other affirmative statements of insurance and endorsements (for
example, but not by way of limitation, an “access endorsement”) as Buyer may
reasonably require, provided that such endorsements are available in the
jurisdiction in which the Business is located and that Buyer pays the cost of
any endorsements requested by Buyer.


 


(b)                                 Promptly after the
execution of this Agreement, Seller shall deliver to Buyer (A) a current
commitment from the Title Company setting forth the basis upon which the Title
Company is willing to insure title to the owned real property and the leased
real property included in the Business Assets (the “Title Commitment”), and (B)
a current Alta/ACSM “as built” Land Title Survey of such real property ;
prepared at Seller’s expense, which shall be, together with such additional
certifications as may be required (and provided at Seller’s expense),
sufficient for the Title Company to issue its Title Policy as required by Section 4.6(a)
(the “Survey”).  Without limiting the
generality of the foregoing, the Survey shall be reasonably satisfactory in
form and substance to Buyer, prepared and certified to Buyer by a registered
land surveyor or licensed civil engineer (registered or licensed in the state
where the owned real property is located) showing (i) the boundaries and legal
descriptions of such owned real property, (ii) the location of all roadways and
other accessways upon, across or adjacent to such premises, (iii) the location
and book and page or document number of all easements and rights-of-way
affecting such real estate which are of record, visible upon inspection of such
property or otherwise known to the person rendering such survey, (iv) all
structures and improvements including sidewalks, parking and paved areas, and
the relation thereof to parcel boundary lines, easements and established


 


12
















 


building and set-back lines, (v) utility
lines (water, sewer, gas, electric and telephone), as either above or below
grade, and (vi) any encroachments by or on adjoining property.  The surveyor shall locate or set bars at all
corners of the surveyed property and shall reflect the same on the Survey.


 


(c)                                  Buyer shall have thirty (30) days after
receipt of the Title Commitment and
the Survey, together with copies of all matters shown as exceptions thereon, to
review the status of title disclosed in the Title Commitment.  Buyer shall approve the Title
Commitment and the Survey unless Buyer
determines, in its commercially reasonable judgment, that any title defect
would materially interfere with the operation of the Business or make title to
the Real Estate unmarketable.  If Buyer
timely objects to any material defect in title to the Real Estate, then Buyer
and Seller shall negotiate in good faith to determine whether the defect can be
cured to Buyer’s satisfaction.  If Buyer
and Seller are unable to agree on a satisfactory cure for any defect within
fifteen (15) days after Buyer delivers its objections, then Buyer shall have
the right to terminate this Agreement and receive a return of the Deposit by
written notice to Seller and the Deposit Holder delivered within ten (10) days
after the negotiation period ends.  If
Buyer fails to terminate this Agreement within the said ten (10) day period,
Buyer shall be deemed to have waived its objections and to have accepted title
as shown on the Title Commitment.


 


4.7                                 Marine Survey.              Within forty five (45) days after the
execution of this Agreement, Seller shall obtain and deliver to Buyer a Marine
Survey carried out no earlier than six (6) months prior to the date of
such delivery with respect to the USS Osceola showing that the USS Osceola is
watertight and in good operating condition. 
In the event such survey is not timely delivered to Buyer, and such
failure continues for more than fifteen (15) days after Buyer gives Seller
written notice of  such failure, Buyer
may terminate this Agreement by written notice to Seller and Deposit Holder and
receive a return of the Deposit.


 


5.                                       Representations and Warranties of Seller. Seller represents and warrants to Buyer as follows,
which representations and warranties are true and accurate on the date hereof,
and shall be true and accurate on the Closing Date. The following
representations and warranties of Seller shall survive the Closing for a period
of eighteen (18) months, except for the representations and warranties in
Section 5.1 (Organization, Standing and Authority of Seller), which shall
survive the Closing indefinitely and for the representations and warranties in
Section 5.4 (Litigation) which shall survive the Closing for the
applicable statutes of limitation and appeal period of any litigation
associated with Seller.


 


13
















 


5.1                                 Organization, Standing and Authority of
Seller. Seller is an Iowa
corporation, duly organized, validly existing and in good standing under the
laws of the State of Iowa. Seller is duly licensed and qualified to do business
in the State of Iowa and to carry on the Business in the State of Iowa. Seller
has the power and authority to execute, deliver and perform this Agreement and
has taken all action required by law for such execution, delivery and
performance. This Agreement is a valid and legally binding agreement of Seller
enforceable in accordance with its terms except to the extent that enforcement
thereof may be limited by (a) bankruptcy, reorganization, moratorium,
fraudulent conveyance or similar laws now or hereafter in effect relating to
creditors’ rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or
in equity). There are no contractual or other limitations on Seller’s power to
enter into this Agreement and to consummate the transactions contemplated
hereby other than the requirement to obtain the approval of the IRGC and of
Clarke County Development Corporation, the City of Osceola, and the Osceola
Water Works Board of Trustees.


 


5.2                                 No Conflict. The execution, delivery and performance of this Agreement by Seller
and the consummation of the transactions contemplated by this Agreement are not
contrary to the Articles of Incorporation or Bylaws of Seller. Except for the
required approvals listed in the last sentence of Section 5.1, the
execution, delivery or performance of this Agreement by Seller and the consummation
of the transactions contemplated by this Agreement will not (a) with the
passage of time, the giving of notice or otherwise, result in a violation or
breach of, or constitute a default under, any term or provision of any
indenture, mortgage, deed of trust, lease, instrument, contract, agreement or
other restriction to which Seller is a party or to which any of Business Assets
is subject, (b) result in the creation of any lien or other charge on any of
the Business Assets, (c) result in an acceleration or termination of any note,
loan or security agreement or similar agreement or instrument to which Seller
is a party or by which any of Business Assets are bound, or (d) result in a
violation of any order, judgment, decree, rule, regulation or law applicable to
Seller.


 


5.3                                 Ownership of Business Assets. Seller has title to each of the Business
Assets, including, without limitation, all leasehold estates and all other
material tangible and intangible assets, free and clear of Encumbrances (as
defined below) except for Encumbrances (a) that are reflected in Seller’s
financial statements, (b) that constitute statutory liens arising in the
ordinary course of business, (c)  that constitute the Assumed
Obligations,  (d) that will be paid
in full at Closing out of Seller’s proceeds from the consummation of the
transactions contemplated hereby, (e) that are to be pro-rated upon
Closing hereunder (e.g. real estate taxes and assessments), and/or (f) that
have been


 


14
















 


consented
to in writing by Buyer (collectively, the “Permitted Liens”).  For purposes of this Agreement, the term
“Encumbrance” shall mean all charges, claims, mortgages, liens, options,
pledges, security interests, rights of first refusal, adverse claims and
restrictions of any kind, including, without limitation, all restrictions on
transfer or other assignment, as security or otherwise, of or relating to use,
quiet enjoyment, voting, transfer, receipt of income or exercise of any other
attribute of ownership, on the
Business Assets. At the Closing,  Seller
shall cause the Business and the Business Assets to be released from the  Encumbrances other than the Assumed
Obligations and current real estate taxes, either by paying the Encumbrances
in  full or by causing the Business and
the Business Assets to be released from any liability therefore.  Notwithstanding the foregoing, Seller may
contest the validity of any such Encumbrance, in which event (A) Seller shall
post a statutory bond, cause the Title Company to insure over, or otherwise
cause the lien of any such Encumbrance to be released as of the Closing, or (B)
Seller shall deposit with the Deposit Holder, from Seller’s proceeds, an amount
equal to 110% of the contested Encumbrance (each a “Contested Encumbrance
Deposit”) at Closing from the Purchase Price, and the Contested Encumbrance
Deposit shall continue to be held by Deposit Holder until any dispute with
respect to such Encumbrance has been resolved or the lien on the Business
Assets applicable to such Encumbrance has been fully released.   Seller and Buyer hereby agree that, unless
paid off and discharged prior to the Closing, the foregoing sentence shall
apply to that certain tax lien relating to the contested use tax imposed by the
State of Iowa on the total completed cost of the USS Osceola, and that for
purposes of this Section 5.3 the amount
that shall be deposited with Deposit Holder pursuant thereto shall be 110% of
the total amount of principal, interest and penalties claimed by the State of
Iowa with respect to claim as of the Closing (currently estimated to be
$750,000). Any Contested Encumbrance Deposits shall be in addition to the
amounts held by Deposit Holder to secure the Secured Indemnity Obligations
under Section 18.4 .  Upon consummation of the transactions
contemplated hereby, Buyer shall receive the Business Assets free and clear of
any Encumbrances except for the Assumed Obligations and current real estate
taxes.  The Business Assets constitute
all of the assets, property and rights necessary and sufficient for the conduct
of the Business as currently conducted by Seller or currently proposed to be
conducted by Seller, other than any required gaming licenses or approvals,
liquor licenses and/or other governmental permits and approvals which Buyer
must obtain as a new operator of the Business.


 


5.4                                 Litigation. Except as set forth on Schedule 5.4,
Seller is not a party to any suit, claim, action or proceeding pending or, to
the best of Seller’s knowledge, threatened by or before any court,
administrative or regulatory body, or governmental agency, or to any
investigation pending or, to the best of Seller’s knowledge, threatened by any
governmental agency which is not


 


15
















 


covered
by insurance and where, to the best of Seller’s knowledge, there is a
substantial likelihood of a judgment, order, decree, liability or other
determination materially and adversely affecting the consummation by Seller of
the transactions contemplated by this Agreement or materially affecting Seller
or any of the Business Assets or the Business.


 


5.5                                 Financial Statements; Financial Condition. Attached hereto as Exhibit
“D” and incorporated herein by this reference are copies of
Seller’s audited financial statements for the 2001, 2002 and 2003 calendar
years (the “Seller’s Financial Statements”). 
The Seller’s Financial Statements and the unaudited balance sheet of
Seller, dated as of May 31, 2004, and the unaudited statement of
operations for the five (5) months then ended (collectively, the “Interim
Financial Statements”), a true and complete copy of which was delivered to
Buyer on or prior to the date hereof, (i) are complete, in accordance with
the books and records of Seller, (ii) accurately reflect the assets, liabilities
and financial condition and results of operations of the Business as at the
respective dates thereof and for the respective periods indicated therein,
except as otherwise noted therein and subject, in the case of the Interim
Financial Statements, to normal and recurring year-end adjustments that will
not, individually or in the aggregate, be material, and (iii) have been
prepared in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto, and except, in the case of the Interim
Financial Statements, for the inclusion of notes).  Except as set forth on Schedule 5.5,
since the date of Seller’s Balance Sheet dated as of December 31, 2003,
none of the following has occurred or arisen in the operation of the Business:


 


(a)                                  (i) Any change, event, development,
circumstance or condition that has caused or reasonably may be expected to
cause, in any one case or in the aggregate, a material adverse condition or
material adverse change in or affecting (x) the transactions contemplated by
this Agreement, or (y) the condition (financial or otherwise), results of
operations, assets, liabilities or prospects of the Business, taken as a
whole,  (a “Material Adverse Change”).


 


(i)                                     For a change in the historical
operating results of the Business to constitute a Material Adverse Change such
change must result in either (I) the EBITDA of the Business for the most
recently completed rolling twelve month period being less than ninety percent
(90%) of the EBITDA of the Business for the year ended December 31, 2003
or (II) the EBITDA of the Business in each of any two consecutive months after
May, 2004 being less than 85% of the EBITDA of the Business for the
corresponding months in the prior year.


 


16
















 


(ii)                                  If Buyer desires to
terminate this Agreement due to the occurrence of a Material Adverse Change, it
must do so within forty five (45) days after it receives notice of the event
giving rise to the Material Adverse Change. 
For example, if the EBITDA of the Business  for August and September of 2004
are less than 85% of the EBITDA of the Business for the August and
September of 2003, then Buyer must elect to terminate this Agreement within
45 days after it receives the monthly financial report for September 2004
which shows the second consecutive month of reduction.  If Buyer fails to timely elect to terminate
this Agreement due to such Material Adverse Change, then Buyer’s right to
terminate this Agreement due to such Material Adverse Change shall terminate as
to that 2 month period, provided that (A) if subsequently the EBITDA of the
Business in for September and October of 2004 are less than 85% of
the EBITDA of the Business for the September and October of 2003,
then this will constitute a new Material Adverse Change with a new time period,
and (B) the failure of Buyer to terminate this Agreement due to a 2 month drop
in EBITDA shall not affect Buyer’s right to terminate the Agreement due to a
rolling 12 month drop.


 


(iii)                               In determining the EBITDA
for December 2003 and December 2004 only, all normal and customary
year end adjustments made to the Business’s financial statements shall be
annualized over the entire year in question (i.e. only one-twelfth of the year
end adjustments shall be allocated to December) to avoid any year-end
distortions of EBITDA.


 


(iv)                              A reduction in  EBITDA caused by
a non-recurring expense (such as a casualty loss or other one-time expense)
shall be ignored for purposes of determining whether a Material Adverse Change
has occurred (subject to Buyer’s rights under Section 15 below).


 


(v)                                 Buyer acknowledges that Buyer is aware that
the Iowa legislature has passed HF 2302  (the
“New Gaming Legislation”), that the New Gaming Legislation was taken into
account in negotiating the Purchase Price payable hereunder and accordingly
agrees that the New Gaming Legislation shall not constitute a Material Adverse
Change within the meaning of this Section 5.5(a), nor shall any change in the
Business’s EBITDA caused by the increase in Iowa taxes on the Business provided


 


17
















 


for in the New Gaming
Legislation be considered in determining whether a Material Adverse Change has
occurred;


 


(b)                                 Any material casualty, loss, damage or
destruction to any of the Business Assets (as defined in Section 15
below);


 


(c)                                  Except for normal, periodic increases in the
ordinary course of business and consistent with past practices, increase in
compensation payable by Seller to any officer, employee or other representative
or agent of Seller (collectively “Personnel”), and employee welfare, pension,
retirement, profit-sharing or similar payment or arrangement made or agreed to
by Seller for any Personnel except pursuant to the existing plans and
arrangements described on Schedule F;


 


(d)                                 Sale, assignment or transfer of any of the
properties or assets of Seller used in the Business, other than in the ordinary
course of business;


 


5.6                                 Taxes. Seller has timely filed or will timely file or cause to be timely
filed all tax returns required by applicable law to be filed in respect to any
period ending before or as of the Closing Date. All taxes payable by Seller, or
otherwise arising from, imposed in connection with, or applicable to the
Business Assets, the operations and/or the Business, in respect to any period
ending before or as of the Closing Date, have been paid on or before the
Closing Date, or, where payment is not yet due, Seller will pay all such Taxes
when due. No income tax audits are pending or being conducted with respect to
Seller. Seller has not received notice from the Internal Revenue Service or any
state or local taxing authority that it intends to audit Seller for income tax
purposes for any open year, nor is there any income tax audit currently in progress.
Buyer acknowledges that Seller is currently undergoing, or expects to undergo,
periodic routine audits by the State of Iowa for gaming and sales tax
purposes.  Seller agrees to provide Buyer
with a summary of the results of such audits promptly after they are received
by Seller.


 


5.7                                 Employees; ERISA. Upon delivery by Buyer of the Deposit,
Seller shall deliver to Buyer a complete list of the names of all officers,
directors, and employees of Seller, together with the date of hire of each of
such persons and the annual or hourly rate of compensation, the job title, job
description, job classification, and benefit plan participation of each of such
persons on the date of this Agreement.  
Seller has previously delivered to Buyer true and correct copies of the
following items: (a) all profit-sharing, deferred-compensation, bonus,
commission, pension, retirement, welfare or incentive plan or contract to which
Seller is a party or by which Seller is


 


18
















 


bound;
(b) written or other formal personnel policies; and (c) plans or agreements
under which fringe benefits, including, without limitation, vacation plans or
programs, sick leave plans, hospitalization or other medical insurance plans or
programs and related benefits afforded to any of Seller’s employees (all of
such plans and agreements described in the immediately preceding clauses (a),
(b) and (c), collectively “Employee Benefit Programs”). Seller is, and on the
Closing Date Seller shall have been, in material compliance with all federal
and state laws, rules and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours, and Seller
is not, and on the Closing Date Seller shall not have been, engaged in any
unfair labor practice, provided that Buyer acknowledges that Seller has a
number of litigation matters (listed on Schedule 5.5)
in which one or more employees have alleged that Seller has engaged in unfair
labor practices.


 


5.8                                 Trademarks.  Schedule 5.8
contains a true and correct listing all tradenames, trademarks, service marks,
trademark licenses, franchises, trademark or tradename registrations,
copyrights, know how, trade secrets and other assets of a like kind, which are,
in whole or in part, used in connection with the operation of the Business
(collectively, the “Trademarks”). Seller has not been charged with infringement
of, nor, to the best of Seller’s knowledge, is Seller threatened to be charged
with infringement of, any unexpired patent, trademark, trademark registration,
trade name, service mark, copyright, copyright registration or other
proprietary right of any party.


 


5.9                                 Environmental Conditions. Seller’s operation of the Business
complies, and has complied since January 1, 2000, in all material respects
with all applicable Environmental Laws. Except as set forth on Schedule 5.9, Seller has not
caused any Release or threatened Release of any Hazardous Material in, on,
under or from any property owned or leased by Seller or any neighboring
property and to the best of Seller’s knowledge there has not been any Release
or threatened Release of any Hazardous Material in, on, under or from any
property owned or leased by Seller or any neighboring property. Except as set
forth on Schedule 5.9, no
judicial or administrative enforcement action, proceeding, claim, order,
directive, notice of inspection, or notice of noncompliance by any governmental
authority pursuant to any applicable environmental law (together,
“Environmental Claims”) has been made, or is pending or, to the best of
Seller’s knowledge, has been threatened against Seller with respect to either
the property owned or leased by Seller or Seller’s operations thereon. With the
exception of radiator fluids, waste oils, greases and similar materials
generated in the maintenance of motors used to propel vehicles and vessels,
which materials have been properly handled in accordance with applicable
Environmental Laws and have all been properly disposed of off-site, and
incidental amounts of cleaning materials cooking oils


 


19
















 


and
similar items customarily used and/or sold in the operations of hotels,
restaurant, convenience store and casino operations, Seller has used no
quantity of any Hazardous Material and has conducted no Hazardous Material
Activity in, on, under or from any real property or facility (including the
Lakeside Casino Resort) used or operated by Seller in connection with the
operation of the Business. Seller has not placed, maintained or caused to exist
any underground storage tank, asbestos containing material, polychlorinated
byphenyl, in the form of electrical transformers or any other form, or landfill
or dump on any real property or facility (including the Lakeside Casino Resort)
used or operated by Seller in connection with the operation of the Business,
except for the underground gasoline and fuel storage tanks included as part of
the convenience store owned by Clay Street Development Co.


 


For purposes of this Section 5.9, the following terms shall have
the meanings set forth below:


 


“Environmental
Laws” means any and all federal, state and/or local laws, regulations and legal
requirements that exist on the Closing Date pertaining to (i) the protection of
health, safety and the indoor and outdoor environment, (ii) the conservation,
management or use of natural resources and wildlife, (iii) the protection or
use of surface water and groundwater, (iv) the management, manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal, remediation or
handling of, or exposure to, any Hazardous Material or (v) pollution
(including, without limitation, any Release to air, land, surface water and
groundwater), and includes, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. 6901 et seq.; the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of
1976 and the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. 6901 et
seq.; the Federal Water Pollution Control Act, as amended by the Clean Water
Act of 1977, 33 U.S.C. 1251 et seq.; the Clean Air Act of 1966, as amended, 41
U.S.C. 7401 et seq.; the Toxic Substances Control Act of 1976, 15 U.S.C. 2601
et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. App. 1801 et
seq; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. 651
et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et seq.; the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. 11001 et seq.; the
National Environmental Policy Act of 1969, 42 U.S.C. 4321 et seq.; the Safe
Drinking Water Act of 1974, as amended, 42 U.S.C. 300(f) et seq.; any similar,
implementing or successor law to


 


20
















 


any
of the foregoing and any amendment, rule, regulation, order or directive issued
thereunder.


 


“Hazardous
Material Activity” means any activity, event or occurrence involving a
Hazardous Material, including, without 
limitation, the manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, Release, threatened Release, abatement,
removal, remediation, handling of or corrective or response action to any
Hazardous Material.


 


“Hazardous
Material” means any substance, chemical, compound, product, solid gas, liquid,
waste, byproduct, pollutant, contaminant or material that is hazardous or
toxic, and includes, without limitation, (i) asbestos, polychlorinated
biphenyls and petroleum; and (ii) any such material classified or
regulated as “hazardous” or “toxic” or as a “contaminant” or “pollutant” under
the laws of the State of Iowa or any Environmental Law provided that cleaning
materials and other items customarily used by commercial businesses in the
operation and maintenance of restaurants and other public facilities in the
Osceola, Iowa area shall not be deemed to be Hazardous Materials for purposes
of this definition so long as such materials or other items are used in their
customary manner for such purposes.


 


“Release”
means any soiling, migrating, seeping, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of
any Hazardous Material into the indoor or outdoor environment, including,
without limitation, the abandonment or discarding of barrels, drums,
containers, tanks and other receptacles containing or previously containing any
Hazardous Material.


 


5.10                           Labor Disputes and Complaints. Except as set forth on Schedule 5.5,
no person, party or labor organization, including, without limitation,
governmental agency of any kind, has made, brought, commenced, or to the best of
Seller’s knowledge, threatened any claim or action, within the last twelve (12)
months, regarding a labor dispute, unfair labor practice, employee
representation proceeding, wage and hour claim, occupational safety and health
claims, employee arbitration, worker’s compensation claims or any other labor
dispute proceeding or investigation, with respect to Seller, the Business or
any of Business Assets. Seller has not entered into a binding agreement with
organized labor that would cover the employees of Seller.


 


5.11                           Consents. Except for (i) the consent and approval of the IRGC and other
governmental agencies or authorities in connection with the operation of the
Business, including, without limitation, filings, consents,


 


21
















 


approvals
and clearances by the US Federal Trade Commission and the Antitrust Division of
the US Department of Justice, as may be required by the Hart Scott Rodino
Antitrust Improvements Act of 1976 (collectively, the “HSR Approvals”) (ii) the
consent and approval of the City of Osceola the Clarke County Development
Corporation, and the Osceola Water Works Board of Trustees, to the assignment
of the Facility Lease, and (iii) and as set forth on Schedule 5.11
(which consents Seller shall use commercially reasonable efforts to obtain
prior to Closing, with the reasonable cooperation of Buyer, as such cooperation
may be reasonably requested by Seller) and except for consents and approvals
already obtained by Seller, no consent, approval or agreement of any person,
entity, party, court, agency or government is required to be obtained by Seller
in connection with the execution and delivery of this Agreement or the
performance of the terms of this Agreement or the consummation of the
transactions contemplated by this Agreement. .


 


5.12                           Brokerage and Finder’s Fees. Except for Libra Securities (“Broker”) (who
Seller will pay a commission pursuant to a separate agreement between Seller
and Broker if and only if the transaction described in this Agreement closes),
neither Seller nor anyone on Seller’s behalf has any actual or potential
liability to any broker, finder or agent, and Seller has not agreed to pay any
brokerage fee, finder’s fee or commission, with respect to the transactions
contemplated by this Agreement. Seller shall indemnify, hold harmless and
defend Buyer against all claims and liabilities asserted against Buyer, any of
the Business Assets, or any combination of them, by any person acting or
claiming to act as a broker or finder on behalf of Seller.


 


5.13                           Options. Except as set forth in Schedule 5.13,
there are no rights of first refusal, options or similar rights granted with
respect to any of the Business Assets. 
Buyer acknowledges that the options listed on Schedule 5.13
are part of the Assumed Obligations and therefore will remain in place as of
the Closing (unless exercised by the parties entitled thereto under the
applicable agreement prior to the Closing).


 


5.14                           Affiliate Contracts. Except for employment agreements and except
as specifically identified on Schedule 5.14,
there does not exist any contract, agreement or other arrangement between
Seller and (a) any affiliate of Seller, (b) any entity in which
Seller directly or indirectly owns more than a five percent (5%) interest or
(c) any of the managers or members of Seller that will not be cancelled by
Seller simultaneously with the Closing hereunder.


 


5.15                           Complimentaries. Seller is not committed to any
complimentary arrangement for food or beverage for any guest or client of the
Business as of


 


22
















 


the
Closing Date, or for any period thereafter, except in accordance with prior
practices.


 


5.16                           Approval of Agreement by Shareholders. This Agreement and each of the transactions
contemplated hereby will be approved by Seller’s Shareholders at a meeting duly
held by Seller prior to the Closing.


 


5.17                           Maintenance of Insurance. Seller carries insurance (including self
insurance) in such amounts and covering such risks as set forth on Schedule 5.17 and will continue
to carry such insurance until the Closing hereunder.


 


5.18                           Compliance with Laws; Permits.


 


(a)                                  Seller is and has been since January 1,
2001 in compliance in all material respects with all statutes, laws, ordinances
or regulations applicable to the conduct or operation of the Business and the
ownership or use of the Business Assets. 
Neither Seller nor any of its executive officers has received since
January 1, 2001, nor is there any basis for, any notice, order, complaint
or other communication from any governmental authority or any other person that
Seller is not in compliance in all material respects with any such laws.


 


(b)                                 Seller is in possession of, and Schedule 5.18 sets forth a true
and complete list of, all Permits necessary for Seller to own, lease and
operate the Business Assets and to carry on the Business in all material
respects as currently conducted (the “Permits”).  Seller is and has been in compliance in all
material respects with all such Permits. 
As of the date hereof, no suspension, cancellation, modification,
revocation or nonrenewal of any Permit is pending or, to the knowledge of
Seller, threatened


 


5.19                           Real Property.


 


(a)                                  Seller has (i) title in fee simple to all
owned real property and (ii) leasehold title to all leased real property, in
each case, subject only to the matters disclosed on the Title Commitment and
Survey to be delivered pursuant to Section 4.6.  No parcel of owned real property or leased
real property is subject to any governmental decree or order to be sold or is
being condemned, expropriated or otherwise taken by any public authority with
or without payment of compensation therefore, nor, to the knowledge of Seller,
has any such condemnation, expropriation or taking been proposed.  All leases of leased real property and all
amendments and modifications thereto are in full force


 


23
















 


and
effect, and, except as disclosed on Schedule 3.2
(list of Assumed Obligations) there exists no default under any such lease by
Seller or to the best knowledge of Seller by any other party thereto, nor any
event which, with notice or lapse of time or both, would constitute a default
thereunder by Seller or to the best knowledge of Seller by any other party thereto.  Except as disclosed on Schedule 3.2, all
leases of leased real property shall remain valid and binding in accordance
with their terms following their assignment to Buyer at the Closing.


 


(b)                                 There are no contractual or legal
restrictions that  materially preclude or
restrict the ability to use any owned real property or leased real property by
Seller or the Business for the purposes for which it is currently being
used.  There are no material latent
defects or material adverse physical conditions affecting the owned real
property or leased real property, or improvements thereon.  All structures and other buildings on the
owned real property or leased real property are adequately maintained and are
in good operating condition and repair for the requirements of the Business as
currently conducted.


 


5.20                           Personal Property.  The
personal property included in the Business Assets has been maintained in all
material respects in accordance with past practice and generally accepted
industry practice.  The personal
property, taken as a whole, is in all material respects in good operating
condition and repair, ordinary wear and tear excepted.  All such personal property that is leased is
in all material respects in the condition required of such property by the
terms of the lease applicable thereto.


 


5.21                           Knowledge.  As used herein, “Seller’s knowledge” or other
references herein to Seller’s knowledge mean the actual knowledge, after due
and careful inquiry (and without personal liability), of Larry Seckington, and
Bruce Schmitter, who Seller represents and warrants are the individuals
primarily involved with the development and operation of the Business and the
other Business Assets on behalf of Seller.


 


6.                                       Representations and Warranties of Buyer. 
Buyer represents and warrants to Seller as follows, each of which is
true and accurate on the date hereof and shall be true and accurate on the
Closing Date. The following representations and warranties of Buyer shall
survive the Closing for a period of eighteen (18) months.


 


6.1                                 Organization, Standing and Authority of Buyer. Buyer is a Nevada company, duly organized,
validly existing and in good standing under the laws of the State of Nevada.
Buyer has the power to execute and deliver this Agreement and has taken all
action required by law for such execution, delivery and performance. This
Agreement is a valid and legally binding


 


24
















 


agreement
of Buyer enforceable in accordance with its terms except to the extent that
enforcement thereof may be limited by (a) bankruptcy, reorganization,
moratorium, fraudulent conveyance or similar laws now or hereafter in effect
relating to creditors’ rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). Except as set forth on Schedule 6.5,
there are no contractual or other limitations on Buyer’s power to enter into
this Agreement or to consummate any of the transactions contemplated by this
Agreement other than the requirement to obtain the consent of the IRGC.


 


6.2                                 No Conflict. The execution, delivery and performance of this Agreement by Buyer,
and the consummation of the transactions contemplated by this Agreement, are
not contrary to the articles of incorporation or bylaws of Buyer. Except as set
forth on Schedule 6.5, the
execution, delivery, performance or consummation of this Agreement by Buyer
will not (a) with the passage of time, the giving of notice or otherwise,
result in a violation or breach of, or constitute a default under, any term or
provision of any indenture, mortgage, deed of trust, lease, instrument,
contract, agreement or other restriction to which Buyer is a party or to which
any of Buyer’s property is subject, (b) result in the creation of any lien
or other charge on any of the assets of Buyer, (c) result in an
acceleration or termination of any loan or security interest agreement or
similar agreement or instrument to which Buyer is a party or (d) result in
a violation of any order, judgment, decree, rule, regulation or law applicable
to Buyer.


 


6.3                                 Litigation.  Buyer is not a party to any
suit, claim, action or proceeding now pending or threatened before any court,
administrative body or regulatory body, or by any governmental agency, or any
investigation now pending or, to the best of Buyer’s knowledge, threatened by
any governmental agency in which there is a substantial likelihood of a
judgment, order, decree, liability or other determination affecting the
consummation by Buyer of the transactions contemplated by this Agreement.


 


6.4                                 Compliance with Laws. Buyer has not violated any statute, law,
ordinance or regulation applicable to Buyer’s operations and properties that
would materially affect the consummation of the transactions contemplated by
this Agreement.


 


6.5                                 Consents. Except (i) as set forth on Schedule 6.5, (ii) with
respect to such consents and licenses required to be obtained from the IRGC or
other governmental agencies or authorities including, without limitation, HSR
Approvals and (iii) as set forth on Schedule 5.11, (a) no consent,
approval or agreement of any person, entity, party, court or government is
required to be obtained by Buyer or the stockholders of Buyer in connection
with the


 


25
















 


execution
and delivery of this Agreement or the performance of the terms of this
Agreement or the consummation of the transactions contemplated by this
Agreement; (b) Buyer’s obligations under this Agreement do not and will
not require any registration with, consent or approval of, notice to or any
action by any person or governmental authority (except as may be required by
the Nevada gaming authorities); and (c) Buyer is not required to obtain any
permit of any kind from any regulatory or governmental authority in order to
consummate the transactions contemplated by this Agreement. Buyer shall use its
commercially reasonable efforts to obtain before the Closing Date, with the
reasonable cooperation of Seller, as such cooperation may be reasonably
requested by Buyer, all requisite consents of third parties, including, without
limitation, governmental or other regulatory agencies, foreign or domestic,
required to be received by or on the part of Buyer for the execution and
delivery of this Agreement and the performance of its terms.


 


6.6                                 Brokerage and Finder’s Fees. Except for Lehman Brothers Inc., neither Buyer nor anyone on
Buyer’s behalf has any liability to any broker, finder or agent, and Buyer has
not agreed to pay any brokerage fee, finder’s fee or commission, with respect
to the transactions contemplated by this Agreement. Buyer shall indemnify and
hold harmless Seller from and against all claims or liabilities asserted
against Seller by any person acting or claiming to act as a broker or finder on
behalf of Buyer.


 


6.7                                 Good Standing in Other States. 
Buyer represents and warrants to Seller that it has licenses to conduct
gambling games in Nevada and that its licenses in such jurisdiction are valid
and in good standing as of the date hereof and as of the Closing.  Buyer further represents and warrants that
Buyer has no knowledge of any circumstances that would prevent Buyer from
obtaining IRGC approval of its Application.


 


7.                                       Seller’s Obligations.


 


7.1.                              Seller’s Covenants. From the date hereof to the Closing Date,
Seller shall continue to conduct the Business in the ordinary course of
business, consistent with past practices, in accordance with standards of
operation existing as of the date hereof and in accordance with Seller’s annual
budget or budgets, copies of which have been or will be provided to Buyer on or
prior to the Effective Date.  
Notwithstanding the foregoing, Buyer and Seller agree that (I) Seller
shall have no obligation to purchase or lease any Gaming Equipment, whether or
not called for in Seller’s annual budget, but (II) Seller shall be obligated to
make the other planned capital expenditures provided for in its current annual
budget.  By way of amplification and not
limitation, between the date of this Agreement and the Closing Date, Seller
shall not do or propose to do, directly or indirectly, any of the following in


 


26
















 


connection
with the Business or the Business Assets without the prior written consent of
Buyer:


 


(a)                                  issue, sell, pledge, dispose of or otherwise
subject to any Encumbrance any Business Assets, other than sales or transfers
in the ordinary course of business consistent with past practice;


 


(b)                                 enter into any lease of real or personal
property or any renewals thereof in connection with the Business;


 


(c)                                  increase the compensation payable or to
become payable or the benefits provided to any employee, except for normal
merit and cost-of-living increases consistent with past practice in salaries or
wages of employees who receive less than $50,000 in total annual cash
compensation from Seller, or increase the compensation payable or to become
payable or the benefits provided to any employee of Seller who receives more
than $50,000 in total annual cash compensation from Seller by more than 5%, or
grant any severance or termination payment to, or pay, loan or advance any
amount to, any employee, or establish, adopt, enter into or amend any employee
welfare, pension, retirement, profit-sharing or similar payment or arrangement
made or agreed to by Seller for any Personnel except pursuant to the existing
plans and arrangements described on Schedule 3.5.3.
Buyer agrees that Seller shall be free to offer and pay retention bonuses (to
retain employees during the uncertainties caused by this transaction) and/or to
pay bonuses at or after Closing to employees of the Business to reward past
service, so long as such payments do not result in an increase in the base pay
to such employees;


 


(d)                                 enter into any contract or agreement with any
related party of Seller in connection with or affecting the Business or the
Business Assets;


 


(e)                                  make any change in any method of accounting
or accounting practice or policy affecting the Seller’s Financial Statements,
except as required by GAAP;


 


(f)                                    cancel, compromise, waive or release any
right or claim relating to the Business or the Business Assets, other than in
the ordinary course of business consistent with past practice, and except that
Seller shall be free to deal with any Excluded Assets and Excluded Liabilities
as it sees fit;


 


27
















 


(g)                                 permit the lapse (without comparable
replacement coverage) of any existing policy of insurance relating to the
Business or the Business Assets;


 


(h)                                 use any 
of the Business Assets other than cash or cash equivalents to pay any
costs or expenses arising out of or relating to the transactions contemplated
by this Agreement;


 


(i)                                     commence or settle any action, claim or
proceeding relating to the Business, the Business Assets or the Assumed
Obligations,  except that Seller shall be
free to deal with any Excluded Assets and Excluded Liabilities as it sees fit;


 


(j)                                     take any action, or intentionally fail to
take any action, that would cause any representation or warranty made by Seller
in this Agreement to be untrue or result in a breach of any covenant made by
Seller in this Agreement or any Ancillary Agreement, or that would have a
Material Adverse Change;


 


(k)                                  enter into any purchase order for the
Business involving a commitment of $50,000 or more which would not be fully
paid by the Closing without first providing Buyer notice thereof and an
opportunity to disapprove such purchase order.


 


7.2                                 Pre-Closing Assistance. Before the Closing Date, at the request of
Buyer, Seller shall use commercially reasonable efforts to provide reasonably
requested information to Buyer for the purpose of assisting Buyer in obtaining
IRGC approval; provided, however, that Seller shall have no
liability whatsoever for or associated with such licensing. Buyer agrees to
indemnify and hold harmless Seller and any representative or agent of Seller,
including, but not limited to, Bruce Schmitter and Larry Seckington, from any
liability, claim, expense or cost associated with assisting Buyer in obtaining
IRGC approval.


 


7.3                                 Exclusivity.  Seller agrees that between the
date of this Agreement and the earlier of the Closing and the termination of
this Agreement, Seller shall not, and shall take all action necessary to ensure
that none of its representatives or agents shall:


 


(a)                                  solicit, initiate, consider, encourage or
accept any other proposals or offers from any person relating to any direct or
indirect acquisition or purchase of all or any portion of the Business or the
Business Assets, whether effected by sale of assets, sale of stock, merger or
otherwise; or


 


28
















 


(b)                                 participate in any discussions,
conversations, negotiations or other communications regarding, or furnish to
any other person any information with respect to, or otherwise cooperate in any
way, assist or participate in, facilitate or encourage any effort or attempt by
any other person to seek to do any of the foregoing.  Seller immediately shall cease and cause to
be terminated all existing discussions, conversations, negotiations and other
communications with any persons conducted heretofore with respect to any of the
foregoing.


 


(c)                                  Seller shall use good faith efforts to notify
Buyer promptly, but in any event within 24 hours, orally and in writing if any
such proposal or offer, or any inquiry or other contact with any person with
respect thereto, is made.  Any such
notice to Buyer shall indicate in reasonable detail the identity of the person
making such proposal, offer, inquiry or other contact and the terms and
conditions of such proposal, offer, inquiry or other contact.  Seller shall not release any person from, or
waive any provision of, any confidentiality or standstill agreement to which
Seller is a party entered into in connection with Seller’s proposed sale of the
Business, without the prior written consent of Buyer.


 


7.4                                 Non-Competition; Non-Solicitation.


 


(a)                                  For a period of five (5) years following
the Closing, Seller shall not engage, directly or indirectly through any person
or contractual arrangement, in any gaming business anywhere within 120 miles of
Osceola, Iowa (the “Territory”), or directly or indirectly through any person
or contractual arrangement, perform management, executive or supervisory
functions with respect to, operate, join, control, render financial assistance
to, receive any economic benefit from, exert any influence upon, or participate
in any gaming business within the Territory. 
Notwithstanding anything to the contrary herein, the provisions of this
Section 7.4 shall not apply to the operation by Seller or its affiliates
of the White Cloud casino, or the Woodlands Racetrack. For purposes of the
preceding sentence, the Woodlands Racetrack shall include any gaming activities
that may in the future be added to the Woodlands Racetrack and also any new
casino or racetrack located within a three (3) mile radius of the Woodlands
Racetrack.  In addition, after the term
of the consulting agreement provided for in Section 7.12
, nothing herein shall limit the right of Larry Seckington or Bruce Schmitter
to obtain employment in the gaming business in the Kansas City area,
notwithstanding the fact that


 


29
















 


some
or all of such area may be within the Territory.  Finally, nothing herein shall be deemed to
prevent Seller, or any affiliate of Seller, from acquiring less than a five
percent (5%) in aggregate interest in any publicly held company, regardless of
the location of any businesses operated by the said public company.


 


(b)                                 For a period of two (2) years following the
Closing, Seller shall not, and shall cause its affiliates and persons who act
at the request of or otherwise for the benefit of Seller or its affiliates in
connection with the recruitment, retention or hiring of employees not to,
solicit, recruit or hire any person who at any time on or after the date of
this Agreement is a Business Employee (as defined below).  The foregoing shall not prohibit (i) a
general solicitation to the public of general advertising or similar methods of
solicitation by search firms not specifically directed at Business Employees or
(ii) Seller or any of its affiliates from soliciting, recruiting or hiring any
Business Employee who has ceased to be employed or retained by Buyer for at
least 12 months.  For purposes of this
Section 7.4, “Business Employee” means, any current or former employee of
Seller who is or was employed in the Business, except that Larry Seckington,
Bruce Schmitter, Gary Voss, Sandy Hale, Nancy Wheatley and Pam Murphy are
expressly excluded from the definition of Business Employee for purposes of
this Section 7.4.


 


(c)                                  As additional consideration for this
Agreement, Seller agrees to use all commercially reasonable efforts to cause
the following affiliates of Seller (the “Restricted Affiliates”) to enter into
separate non-competition agreements meeting the requirements of
Section 7.4(a) (except that the term shall have been shortened to two (2)
years after Closing)(each, a “Non-Competition Agreement”, and together the
“Non-Competition Agreements”) and delivered to Buyer.


 


(1)                                  Grace Entertainment, Inc.


 


(2)                                  Larry Seckington


 


(3)                                  Bruce Schmitter


 


(4)                                  Howard Grace


 


(5)                                  Richard Deshon


 


(6)                                  John Gourley


 


30
















 


(7)                                  Gary Vos


 


Each Non-Competition Agreement shall bind each
Restricted Affiliate and its or their affiliates. For purposes of this
Section 7.4(d), an “affiliate” of a Restricted Affiliate shall mean an
entity which controls the Restricted Affiliate, is controlled by the Restricted
Affiliate, or is under common control with the Restricted Affiliate. Buyer
expressly agrees that a default by one Restricted Affiliate under its
Non-Competition Agreement shall not constitute a default by Seller or any other
Restricted Affiliate, and that Buyer shall look solely to each Restricted
Affiliate for any damages caused by any breach by that Restricted Affiliate of
its  Non-Competition Agreement.


 


(d)                                 Seller acknowledges that the covenants of
Seller set forth in this Section 7.4 are an essential element of this
Agreement and that any breach by Seller of any provision of this
Section 7.4 will result in irreparable injury to Buyer.  Seller acknowledges that in the event of such
a breach, in addition to all other remedies available at law, Buyer shall be
entitled to equitable relief, including injunctive relief, and an equitable
accounting of all earnings, profits or other benefits arising therefrom, as
well as such other damages as may be appropriate.  Seller has independently consulted with its
counsel and after such consultation agrees that the covenants set forth in this
Section 7.4 are reasonable and proper to protect the legitimate interest
of Buyer.


 


(e)                                  If a court of competent jurisdiction
determines that the character, duration or geographical scope of the provisions
of this Section 7.4 are unreasonable, it is the intention and the
agreement of the parties that these provisions shall be construed by the court
in such a manner as to impose only those restrictions on Seller’s conduct that
are reasonable in light of the circumstances and as are necessary to assure to
Buyer the benefits of this Agreement. 
If, in any judicial proceeding, a court shall refuse to enforce all of
the separate covenants of this Section 7.4 because taken together they are
more extensive than necessary to assure to Buyer the intended benefits of this
Agreement, it is expressly understood and agreed by the parties that the
provisions hereof that, if eliminated, would permit the remaining separate
provisions to be enforced in such proceeding, shall be deemed eliminated, for
the purposes of such proceeding, from this Agreement.


 


(f)                                    Notwithstanding the preceding provisions of Section 7.4(a), Buyer
acknowledges that an affiliate of Seller (Grace Entertainment, Inc.) (the
“Ottumwa Affiliate”) is currently seeking approval from the City of Ottumwa,
Iowa, to construct and operate a


 


31
















 


Gaming
Facility that would be within the Territory. 
Buyer agrees that the Ottumwa Affiliate may continue its efforts to
obtain permission for such a facility without violating Section 7.4(a),
subject to the following.  Seller agrees
that if within five (5) years after Closing, the Ottumwa Affiliate (or any
other affiliate of Seller) is successful in obtaining the approval of the City
of Ottumwa and the State of Iowa to construct and operate a Gaming Facility in
Ottumwa, Iowa, then Seller shall promptly notify Buyer in writing of such
approval, and Buyer shall have the option, exercisable within sixty (60) days
after receipt of such notice, to purchase a 50% ownership interest in the said
Gaming Facility by paying to the Ottumwa Affiliate a amount equal to one-half
of all third party costs incurred by the Ottumwa Affiliate in pursuing the said
Gaming Facility and agreeing to provide 50% of the capital required to
construct and operate such Gaming Facility. 
If Buyer elects to purchase a 50% ownership interest in the said Gaming
Facility, then Buyer and Seller (and/or the Ottumwa Affiliate) shall negotiate
in good faith the terms of a joint venture agreement to jointly develop the
said Gaming Facility.  If Buyer elects
not to purchase the said 50% ownership interest, then the Ottumwa Affiliate
shall be free to develop and operate the said Gaming Facility on its own,
notwithstanding Section 7.4(a) (but
still subject to the restrictions in Section 7.4(b)).


 


7.5                                 Notification of Certain Matters.


 


(a)                                  Seller shall give prompt written notice to
Buyer upon Seller becoming aware of (i) the occurrence or non-occurrence of any
change, condition or event the occurrence or non-occurrence of which would
render any representation or warranty of Seller contained in this Agreement, if
made on or immediately following the date of such event, untrue or inaccurate,
(ii) the occurrence of any change, condition or event that has had or is
reasonably likely to have a Material Adverse Change, (iii) any failure of
Seller or any affiliate of Seller to comply with or satisfy any covenant or
agreement to be complied with or satisfied by it hereunder or any event or
condition that would otherwise result in the nonfulfillment of any of the
conditions to Buyer’s obligations hereunder, (iv) any notice or other
communication from any person alleging that the consent of such person is or
may be required in connection with the consummation of the transactions
contemplated by this Agreement or (v) any claim, action or proceeding pending
or, to Seller’s knowledge, threatened against a party or the parties relating
to the transactions contemplated by this Agreement.


 


(b)                                 Buyer shall give prompt written notice to
Seller upon Buyer becoming aware of (i) the occurrence or non-occurrence of any


 


32
















 


change,
condition or event the occurrence or non-occurrence of which would render any
representation or warranty of Buyer contained in this Agreement, if made on or
immediately following the date of such event, untrue or inaccurate,
(ii) any failure of Buyer or any affiliate of Buyer to comply with or
satisfy any covenant or agreement to be complied with or satisfied by it
hereunder or any event or condition that would otherwise result in the
nonfulfillment of any of the conditions to Seller’s obligations hereunder,
(iii) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
consummation of the transactions contemplated by this Agreement or (iv) any
claim, action or proceeding pending or, to Buyer’s knowledge, threatened
against a party or the parties relating to the transactions contemplated by
this Agreement.


 


7.6                                 Payment of Liabilities. 
Seller shall pay or otherwise satisfy in the ordinary course of
business, prior to the Closing, all of the liabilities and obligations incurred
in connection with the Business (other than the Assumed Obligations) and, after
the Closing, the Excluded Obligations.


 


7.7                                 Bulk Transfer Laws. 
Buyer hereby waives compliance by Seller with any applicable bulk sale
or bulk transfer laws of any jurisdiction in connection with the sale of the
Business Assets to Buyer (other than any obligations with respect to the
application of the proceeds therefrom). 
Pursuant to Section 18.2.1, Seller has agreed to indemnify Buyer
against any and all liabilities that may be asserted by third parties against
Buyer as a result of Seller’s noncompliance with any such law.


 


7.8                                 Cooperation for Financing. 
Seller shall at Buyer’s cost and expense provide all reasonable
cooperation to Buyer with respect to the Business and the Business Assets to
permit the completion of Buyer’s financing in connection with the transactions
contemplated by this Agreement, the St. Joseph Agreement and the Mark Twain
Casino Agreement (each as defined in Section 36), including without
limitation, by (i) permitting the use of the Seller’s Financial Statements, the
Interim Financial Statements, any financial statements subsequently delivered
by Seller pursuant to Section 7.11 and any pro forma financial information
derived therefrom, to be used by Buyer in connection with any offering
memorandum, registration statement, prospectus or other like documentation (the
“Financing Materials”), and (ii) making Seller’s auditors available to
Buyer and its representatives, agents, attorneys and accountants for the
purposes of preparing any Financing Materials or providing “comfort letters” to
any underwriters involved in such financing.


 


33
















 


7.9                                 Environmental Investigations.


 


(a)                                  In the event that Buyer notifies Seller that
any Phase I Environmental Assessment pursuant to the American Society for
Testing and Materials Standard E 1527-00 (Standard Practice for Environmental
Site Assessments: Phase I Environmental Site Assessment Process) (each, a
“Phase I Investigation”) delivered to Buyer pursuant to Section 4.5
has discovered or reported any fact, matter or circumstance that reasonably
requires further investigation, Seller shall, at Seller’s sole cost and
expense, cause to be carried out by an assessor (who shall be reasonably
satisfactory to Buyer) a Phase II Environmental Assessment pursuant to the
American Society for Testing and Materials Standard E 1903-97
(Standard Practice for Environmental Site Assessments: Phase II Environmental
Site Assessment Process) (each, a “Phase II Investigation”) on each parcel
of real property with respect to which there was any such fact, matter or
circumstance discovered or reported, and upon completion of such Phase II
Investigations, if any, Seller shall provide copies to Buyer of all reports and
documents related thereto.


 


(b)                                 If required by Buyer’s lender, Seller shall,
at the sole cost and expense of Buyer, and within sixty (60) days prior to the
scheduled Closing Date (unless the Closing is delayed by more than four 4
months, in which case the relevant date for purposes of this section shall
be sixty (60) days prior to the Closing, as rescheduled), cause the
Phase I Investigation delivered pursuant to Section 4.1 to be
updated, and upon completion of such  update,
Seller shall provide copies of all reports and documents related thereto to
Buyer.


 


(c)                                  In the event that Buyer notifies Seller that
any of the Phase I Investigations delivered to Buyer pursuant to
Section 4.5 or 7.9(b) have discovered or reported any fact, matter or
circumstance that reasonably requires further investigation, Seller shall, at
Seller’s sole cost and expense, cause to be carried out by an assessor (who
shall be reasonably satisfactory to Buyer) a Phase II Investigation on
each parcel of real property with respect to which there was any such fact,
matter or circumstance discovered or reported, and upon completion of such
Phase II Investigations, if any, Seller shall provide copies to Buyer of
all reports and documents related thereto.


 


(d)                                 Seller hereby agrees that any Phase I
Investigation or Phase II Investigation provided to Buyer by Seller
pursuant to this Section 7.9 or otherwise may be provided to Buyer’s
advisers, representatives, underwriters and agents for the purposes of


 


34
















 


consummating
the transactions contemplated by this Agreement and the financing therefor.


 


7.10                           Maintenance of Seller Records. 
Seller shall keep and maintain the Seller Retained Records for a period
of three (3) years  after the
Closing Date, and shall allow Buyer access during business hours to, and copies
of, the Seller Records during such period, as Buyer may reasonably request.


 


7.11                           Delivery of Financial Information.  From
the date hereof until the Closing Date Seller shall furnish to Buyer the
following documents:  (a) on a
monthly basis and within 15 days after the end of each calendar month,
unaudited balance sheets of Seller as of the end of each such month, and the
unaudited statements of operations for the month then ended (the “Subsequent
Monthly Statements”); and (b) if the Closing shall not have occurred prior to
January 31, 2005, audited financial statements for the year ended
December 31, 2004; provided that the financial statements furnished pursuant
to this Section 7.11 (i) shall be complete, in accordance with the
books and records of Seller, (ii) shall accurately reflect the assets,
liabilities and financial condition and results of operations of the Business
as at the respective dates thereof and for the respective periods indicated
therein, except as otherwise noted therein and subject, in the case of the
Subsequent Monthly Statements, to normal and recurring year-end adjustments
that will not, individually or in the aggregate, be material, and
(iii) shall have been prepared in accordance with GAAP consistently
applied (except as may be indicated in the notes thereto, and except, in the
case of the Subsequent Monthly Statements, for the inclusion of notes).


 


7.12                           Consulting Postclosing. 
Seller agrees to use good faith efforts to make Bruce Schmitter, Larry
Seckington and Nancy Wheatley (to the extent that she is not employed by Buyer)
available to consult with the Buyer on a part-time basis for a period of up to
six (6) months after the Closing on terms and conditions to be negotiated
between Buyer and each of Bruce Schmitter and Larry Seckington after the
Effective Date of this Agreement.


 


7.13                           Purchase of Gaming Equipment. 
Notwithstanding the provisions of Section 7.1 above, Seller may, at
Seller’s option, elect to purchase or lease Gaming Equipment after the
Effective Date.  If Seller elects to
purchase or lease Gaming Equipment, the following provisions shall apply: (a)
Seller shall notify Buyer of its intent to purchase or lease Gaming Equipment,
and (b) Seller shall then consult with Buyer and obtain Buyer’s approval of the
number and types of Gaming Equipment to acquire and the terms (purchase price
and/or lease terms, as appropriate), which approval shall not be unreasonably
withheld, provided that all new Gaming Equipment shall ticket in/ticket out
compatible.  If Buyer approves the
acquisition of new


 


35
















 


Gaming
Equipment, then (A) the Purchase Price hereunder shall be increased by the tax
net book value of all purchased new Gaming Equipment, and (B) all leases for
new Gaming Equipment shall be treated as Assumed Obligations.  If Buyer disapproves the acquisition of any
new Gaming Equipment, then if Seller nonetheless acquires the said new Gaming
Equipment, the said new Gaming Equipment shall be treated as Excluded Assets.


 


8.                                       Conditions Precedent to Closing of Buyer. The obligations of Buyer under this
Agreement are subject to satisfaction of the following conditions at or before
the Closing Date; provided, however, that satisfaction of any of the following
conditions may be waived by Buyer.


 


8.1                                 Accuracy of Representations and Warranties. The representations and warranties of
Seller contained in this Agreement shall be true and accurate in all material
respects as if made at and as of the Closing Date; provided, however, that if
there has been a material change in a representation or warranty of Seller
between the Effective Date and Closing and (a) such change was not caused by a
default by Seller hereunder, (b) does not constitute a Material Adverse Change
and (c) Seller agrees at the Closing that any Damages associated with such
change shall be an Excluded Obligation and further agrees to indemnify and hold
harmless the Buyer Indemnitees in full from and against any Damages arising as
a result of such change without regard to, or in any way reducing the maximum
amount available under, the limitation of Seller’s Indemnity set forth in
Section 18.2.3, then such change shall not constitute a failure of a
condition precedent to Buyer’s obligation to close (i.e. Buyer may not cancel
this Agreement due to such change). 
Notwithstanding the foregoing, if the change relates to a potential
liability of the Business or Business Assets, Buyer may require a reasonable
increase in the amount of the security provided in Section 18.4
equal to 110% of the estimated liability.


 


8.2                                 Performance of Covenants. Seller shall have duly performed all
obligations, covenants and agreements undertaken by Seller herein and complied
with all terms and conditions applicable to Seller hereunder to be performed or
complied with before the Closing Date.


 


8.3                                 Officer’s Certificate. Buyer shall have received a certificate
from Seller, dated as of the Closing Date and executed by an officer of Seller,
to the effect that (a) all of the conditions contained in Section 9
have been satisfied; (b) all of the representations and warranties of
Seller contained in this Agreement are true and accurate in all material respects
as of the Closing Date or, with respect to those qualified as to materiality,
in all respects (or disclosing any material changes in any of the matters
addressed in the


 


36
















 


representations
and warranties); and (c) all of the covenants and agreements of Seller
contained in this Agreement and required to be performed before the Closing
have been performed and Seller is not in breach or default of any of Seller’s
obligations or representations or warranties contained in this Agreement.


 


8.4                                 Threatened or Pending Litigation. No suit, action, or other proceeding shall
be pending by or before any court or governmental agency seeking to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the consummation of any of the transactions contemplated hereby.


 


8.5                                 Gaming Approval. Buyer shall have obtained IRGC approval in
accordance with Section 4 and MGC approval of the St. Joseph Agreement and
the Mark Casino Agreement in accordance with the terms of those Agreements.


 


8.6                                 Consents. The consents of the IRGC, of Clarke County Development Corporation,
the City of Osceola, and the Osceola Water Works Board of Trustees, the HSR
Approvals and the other consents set forth on Schedules 5.11
and 6.5 to the transfer all of the Business Assets to Buyer in
the manner contemplated by this Agreement and to permit Buyer to operate the
Business as presently conducted after the Closing Date, shall have been
obtained.


 


8.7                                 Non-Competition Agreements. 
Seller shall have delivered the Non-Competition Agreements provided for
in Section 7.4(c).


 


8.8                                 Material Adverse Change. 
There shall not have occurred any Material Adverse Change.


 


8.9                                 Title Policy. 
Seller shall have delivered to Buyer the Title Policy.


 


8.10                           Simultaneous Closing.  The
transactions contemplated by the St. Joseph Agreement and by the Mark Twain
Casino Agreement shall be closing simultaneously with the Closing.


 


9.                                       Conditions Precedent to Obligations of Seller. The obligations of Seller under this Agreement
are subject to satisfaction of the following conditions at or before the
Closing Date; provided, however, that satisfaction of any of the following
conditions may be waived by Seller.


 


9.1                                 Accuracy of Representations and Warranties. The representations and warranties of Buyer
contained in this Agreement shall be


 


37
















 


true
and accurate in all material respects as if made at and as of the Closing Date.


 


9.2                                 Performance of Covenants. Buyer shall have duly performed all
obligations, covenants and agreements undertaken by Buyer herein and complied
with all terms and conditions applicable to Buyer hereunder to be performed or
complied with before the Closing Date.


 


9.3                                 Litigation. On the Effective Date, Buyer shall have executed and delivered to
Seller, a schedule showing all litigations pending or threatened, which
would delay or prevent the closing of this Transaction.


 


9.4                                 Officer’s Certificate. Seller shall have received a certificate
from Buyer, dated as of the Closing Date and executed by an officer of Buyer,
to the effect that (a) all of the conditions contained in Section 8 have
been satisfied; (b) all of the representations and warranties of Buyer
contained in this Agreement are true and accurate as of the Closing Date; and
(c) all of the covenants and agreements of Buyer contained in this Agreement
and required to be performed before the Closing have been performed and Buyer
is not in breach or default of any of Buyer’s obligations or representations or
warranties contained in this Agreement.


 


9.5                                 Consents. The consents of  the IRGC and
of Clarke County Development Corporation, the City of Osceola, and the Osceola
Water Works Board of Trustees, the HSR Approvals and the other consents set
forth on Schedules 5.11 and 6.5
to the transfer all of the Business Assets to Buyer in the manner contemplated
by this Agreement shall have been obtained.


 


9.6                                 Simultaneous Closing.  The
transactions contemplated by the St. Joseph Agreement and by the Mark Twain
Casino Agreement shall be closing simultaneously with the Closing.


 


10.                                 Closing. Provided that all of the conditions to the close of the transaction
contemplated by this Agreement as set forth in Sections 8 and 9 and this
Section 10 have been satisfied or waived, the transaction shall close on
the date selected by Buyer that is at least ten (10) but no more than
thirty (30)  days after the later to
occur of (i) the date Buyer is approved by the IRGC to operate an excursion
gaming riverboat from Osceola, Iowa or (ii) the date the Missouri Gaming
Commission (the “MGC”) approves Buyer’s applications pursuant to the St. Joseph
Agreement and the Mark Twain Casino Agreement (collectively, the “MGC
Approval”) in accordance with Section 4.4 above (unless the parties mutually
agree to waive the requirements of Section 36 in which event the later
date referred to above shall be the date of such waiver) (the “Closing
Date”).  Notwithstanding the


 


38
















 


foregoing,
the Closing Date must occur by not later than December 31, 2004 (the
“Outside Closing Date”) unless both Seller and Buyer agree to a later date,
provided that if the only remaining condition to Closing is obtaining IRGC
and/or MGC consent , then at the option of either Buyer or Seller, the Outside
Closing Date may be extended for up to two (2) ninety (90) day periods (the
“Extension Periods”) by written notice delivered by the requesting party to the
other party prior to the date of the current Outside Closing Date.  Buyer shall give Seller written notice
specifying the Closing Date not less than five (5) business days prior thereto.


 


10.1                           Conditions to the Closing. The transaction contemplated by this
Agreement shall not close unless and until:


 


(a)                                  All parties have delivered all sums and
documents required as provided in Sections 10.2 and 10.3;


 


(b)                                 All of the conditions set forth in Sections 8
and 9 have been waived or satisfied as provided by this Agreement; and


 


(c)                                  The Closing Statements have been prepared and
delivered in accordance with the provisions of Section 13.10.


 


10.2                           Seller’s Deliveries. At the Closing, Seller shall deliver to
Buyer each of the following:


 


(a)                                  Bill of Sale for the vessel that constitute
the USS Osceola ;


 


(b)                                 Current U.S. Coast Guard Certificates of
Documentation (if required) ;


 


(c)                                  Current Federal Communications Commission
ship-to-shore radio licenses;


 


(d)                                 Assignments of all material agreements;


 


(e)                                  Bill(s) of sale for the Business Assets;


 


(f)                                    The Assignment and Assumption Agreement executed
by Seller;


 


(g)                                 A counterpart to each of the Non-Competition
Agreements, each executed by the respective persons named in Section 8.7;
and


 


39
















 


(h)                                 Such other documents required to be delivered
under this Agreement.


 


10.3                           Buyer’s Deliveries; Payment. At the Closing, Buyer shall deliver to
Seller each of the following:


 


(a)                                  Application of Documentation for USS Osceola
];


 


(b)                                 Citizenship Declaration for Buyer;


 


(c)                                  The Assignment and Assumption Agreement executed
by Buyer;


 


(d)                                 Cash by wire transfer of funds for the
Purchase Price, or in the event of any withholding pursuant to
Section 5.3, for the balance of the Purchase Price; and


 


(e)                                  Such other documents required to be delivered
under this Agreement.


 


10.4                           Prorations. The following matters and items shall be apportioned between the
parties hereto or, where applicable, credited in total to a particular party
hereto, as of the Closing:


 


(a)                                  Taxes, including, without limitation, real
estate taxes and assessments, personal property, business, prepaid gaming and
occupation taxes, if any (based on the most current available information), and
water and sewer charges shall be prorated as of the Closing Date, or charged on
the basis of applicable governmental records, and shall be readjusted when the
actual bills are available pursuant to Section 13.10. Such taxes assessed
for the fiscal year shall be prorated as of the date on which billings are
received with respect thereto, with Seller being responsible for the taxes
accrued with respect to all periods before the Closing Date, and Buyer being
responsible for all subsequent periods.


 


(b)                                 Telephone and utility services shall be
prorated as of the Closing Date. All deposits, if any, made by Seller as
security under any public service contract shall be credited to Seller if the
same remain on deposit for the benefit of Buyer. Where possible, cut-off meter
readings shall be secured for all utilities as of the Closing Date.


 


(c)                                  Any amount prepaid or payable under any lease
or option agreement shall be prorated at the Closing and any accrued rental and


 


40
















 


any
percentage rental under space leases shall be prorated as and when collected.
All security deposits held by Seller, including customer deposits held in the
casino cage, shall be transferred to Buyer, and all obligations with respect to
such security deposits shall be assumed by Buyer on the Closing Date.


 


(d)                                 Fees paid or payable for transferable
licenses and permits shall be prorated as of the Closing Date.


 


(e)                                  With respect to the Business Assets and
business operations then sold and conveyed to Buyer, Seller’s insurance shall
be canceled on the Closing Date, and Seller shall retain all prepaid premiums
and be responsible for any additional premiums due on or after the Closing Date
due to any insurance audit or retrospective rating adjustments that were
incurred prior to Closing and any payment of claims within the applicable
deductibles required to be paid thereunder. Buyer shall arrange for immediate
effectiveness of Buyer’s own insurance coverage as of the Closing Date.


 


(f)                                    On the Closing Date, such other items shall
be prorated as are provided for in this Agreement or as are normally prorated
and adjusted in the sale of a casino business, including, without limitation,
all deposits and prepaid items that inure to the benefit of Buyer (including,
but not limited to, prepaid insurance) and the interest on the Assumed
Obligations and on any other obligations being assumed by Buyer hereunder as of
the Closing Date.


 


In
making apportionments, all prepaid rents and similar items shall be prorated on
the basis of the number of days of occupancy before and after the time set for
such adjustments to be made, and all prepaid taxes, charges and impositions
shall be prorated on the basis of the number of days of the applicable tax
year, or on the basis of unit costs or, if this is not practicable, on the
basis of the number of days before and after that time.


 


11.                                 Closing Documents. As soon as practicable after the date of
this Agreement, Seller shall prepare and submit to Buyer for its approval,
which approval shall not be unreasonably withheld, the form of the documents to
be delivered on the Closing Date, including, without limitation, bills of sale,
assignments, assumptions, novations and other title transfer instruments,
together with such other documentation as may be required to consummate the
transactions contemplated by this Agreement on the Closing Date. On the Closing
Date, Seller shall deliver to Buyer final, executed bill(s) of sale,
assignments and other title transfer instruments or documents required to
consummate the transactions contemplated by this Agreement on the Closing Date
on behalf of Seller, and Buyer shall deliver to Seller final, executed
assumption,


 


41
















 


novation
or other agreements or documents required to consummate the transactions
contemplated by this Agreement on the Closing Date on behalf of Buyer. All
instruments required to be recorded shall be in recordable form at the time of
delivery by Seller or Buyer, as the case may be.


 


12.                                 Further Assurances. At any time and from time to time after the
Closing Date, at the request of Buyer, Seller shall execute and deliver such
further instruments of transfer and assignment as Buyer reasonably may require
to more effectively transfer and assign to and vest in Buyer the Business
Assets.


 


13.                                 Transfer of Operations and Operating Cash.  The
Business shall be transferred to Buyer at 11:59 P.M. Central Time on the
Closing Date (the “Closing Time”). 
Without prejudice to the further provisions of this Section 13 set
forth below, each of Buyer and Seller agree to develop a mutually acceptable
ownership transition plan prior to the Closing Date to address gaming machine
drop procedures and other cash transfer procedures to be applied as of the
Closing Time in order to effect a fair and equitable accounting of cash and the
transfer of possession of Operating Cash.


 


13.1                           Possession of Osceola. Seller shall give, assign and transfer to
Buyer complete possession of the Osceola at the Closing Time on the Closing
Date. Buyer and Seller shall pre-close the transaction not later than the day
immediately preceding the Closing Date. At such pre-closing, Buyer and Seller
shall deliver for inspection all documents required of either party, except to
the extent that any delivery is waived by either party, in accordance with this
Agreement, to complete the transfer of ownership of the Business Assets from
Seller to Buyer following the procedures set forth herein to the extent
applicable. Except as provided below, the bars and restaurant and the casino on
the Osceola shall be operated by Seller for Seller’s benefit until the Closing Date.


 


13.2                           Outstanding Chip Obligations. Buyer agrees that it will assume all of
Seller’s obligations with respect to any uncashed chips as of the Closing
Time.  At the Closing Buyer shall receive
a credit, applied to the Operating Cash for the purposes of Sections 1(d)
and 2(a), for a percentage of the face value of such outstanding chips based on
industry standards.


 


13.3                           Transfer of Gaming Operations. With the exception of the slot machines,
the transfer of the gaming operations associated with the Business, including
the Gaming Equipment, shall take place starting at the Closing time, and
effective as of the Closing Time, on the Closing Date. Seller shall control and
Buyer shall review and verify the physical count of the drop boxes and gaming
tables. All of Seller’s Cash in the casino cages or banks shall be


 


42
















 


counted
and included as Operating Cash for the purposes of Sections 1(d) and 2(a).


 


13.4                           Final Slot Drop. Starting at the Closing Time and effective
as of the Closing Time, the cash or tokens in the hoppers, buckets (or slot
drops) and the bill acceptors in all slot machines shall be collected and
counted (by emptying and counting the cash in the loads of all machines) by
Seller and verified by Buyer (the “Final Slot Drop”), and shall be included as
Operating Cash for the purposes of Sections 1(d) and 2(a).


 


13.5                           Progressive Jackpots. Buyer shall assume and be responsible for
the accrued liability starting at the Closing Time and effective as of the Closing
Time, shown by the progressive meter readings on all progressive slot machines
(including video poker) and all progressive table games as of the Closing Date,
and the amount of such liability shall be deducted from the Purchase Price.


 


13.6                           Promotions. Buyer understands that Seller, in the ordinary course of business,
has conducted, and will continue to conduct such promotions in the ordinary
course of business and consistent with past practices from the Effective Date
until the Closing, special events or promotions designed to attract customers
to the Riverboats one or more of which special events or promotions involved
the issuance of discount or other customer entitlement coupons. Buyer agrees to
accept and honor all such valid and unexpired discount or entitlement coupons
tendered to the Riverboats after the Closing Time in accordance with the terms
thereof, provided, however, that the amount of the accrued liability pursuant
to all Players Club entitlements shall be deducted from the Purchase Price.


 


13.7                           Slot Machine Wide Area Progressive Liability. In the event that Seller participates in
slot machine wide area progressive networks, Buyer shall assume such contracts
as of the Closing Time, but shall have the option to require Seller to deliver
an appropriate termination notice consistent with the terms of any or all of
such wide area network contracts. Buyer shall assume all liability associated
with the wide area progressive network contracts, provided, however, that the
amount of the accrued liability so assumed shall be deducted from the Purchase
Price if and to the extent that accrued liability is not already funded as of
the Closing.


 


13.8                           Seller’s Post Closing Access. For a period of not more than one hundred
twenty (120) days after the Closing Date, Buyer shall make available to Seller
and Seller’s representatives, on a rent-free basis, an exclusive license to use
a secured office sufficient for two or three persons for the purpose of
permitting Seller to complete Seller’s partial year audit for 2004 and/or 2005,


 


43
















 


and
for such other post-closing activities as are reasonably necessary after the
Closing Date. Conditional upon the execution by Seller of a non-disclosure
agreement in form reasonably satisfactory to Buyer, Buyer agrees to provide
Seller with access to the existing data processing equipment for the Business
for a period of one hundred twenty (120) days after the Closing Date.  Buyer further agrees to assist Seller in
processing final payrolls, accounts payable and general ledger runs for Seller
on the system at no cost to Seller, and Seller shall allow Buyer to use the
same programs at no cost to Buyer for Buyer’s own transitional use during such
one hundred twenty (120) days period, provided that such use by Seller is
not in violation of any applicable software license.


 


13.9                           Closing Statements. Seller shall prepare and deliver to Buyer
on the Closing Date a preliminary closing statement (a “Preliminary Closing
Statement”) as of the Closing Date, which shall show the net amount due either
to Seller or Buyer based on items for which a specific credit or debit is
provided in this Agreement, which statement shall be in form and substance
acceptable to Buyer. Such net amount shall be added to or subtracted from the
payment of the cash balance of the Purchase Price to be paid to Seller pursuant
to Section 3 on the Closing Date. Within sixty (60) days after the Closing
Date, Buyer shall deliver a final closing statement (a “Final Closing Statement”)
to Seller setting forth the final determination of all items to be included in
the Closing Statements. To the extent that amounts are determined to be owing
by Seller to Buyer or by Buyer to Seller which are not disputed, such amounts
shall be settled in cash between Buyer and Seller. Should Buyer and Seller
disagree on the amount due either Buyer or Seller as reflected in the
Preliminary Closing Statement, or the Final Closing Statement, any such dispute
where less than $50,000 is in dispute shall be resolved by Buyer’s and Seller’s
accountants (whose mutual decisions shall be final and binding on each of Buyer
and Seller); provided, however, that should such accountants be unable to
resolve any dispute with respect to the Preliminary Closing Statement within
ten (10) business days of the Closing Date or any dispute with respect to the
Final Closing Statement within ten (10) business days following Seller’s
receipt of the Final Closing Statement from Buyer, such disputes, as the case
may be, shall be resolved by arbitration. In the event that Buyer’s and
Seller’s accountants are the same accounting firm, Seller shall be allowed to
appoint its own representative to represent Seller with respect to the dispute
which representative shall be a nationally recognized public accounting firm.
If at any time within ninety (90) days after the Closing Date either Buyer or
Seller discovers items that should have been included in the Closing Statements
but were omitted therefrom, then such items shall be adjusted in the same
manner as if their existence had been known at the time of the preparation of
the Closing Statements, and any payment owing as a result thereof shall be made
as provided above in this Section 13.


 


44
















 


13.10                     Employee Obligations.                        Buyer shall have no liability, cost or
obligation whatsoever under or by reason of any severance pay, compensation,
accrued vacation time, personal time, bereavement time, sick-leave time,
salary, bonus, fringe benefit, welfare benefit, pension benefit or other
employee benefit or claim of any kind affecting the employees of Seller prior
to the Closing Date. Seller shall have no liability, cost or obligation
whatsoever under or by reason of any compensation, benefit plan, or bonus or
profit sharing program of Buyer affecting the employees of Buyer after the
Closing Date.


 


13.11                     Material Purchase Orders. Buyer shall acquire all rights and assume
all obligations under all open  purchase
orders made in the ordinary course of business consistent with past practice
and existing as of the Closing Date; provided, however, that Seller shall
provide Buyer notice of, and an opportunity to consult with respect to,
every  purchase order that is in excess
of $50,000.00 which will not be paid in full prior to the Closing.  Seller shall provide Buyer with a list of all
such purchase orders approximately thirty (30) days prior to the Closing and
shall update that report as of the Closing.


 


13.12                     No Control. Before the Closing Date, Buyer shall not directly or indirectly
control, supervise, direct or interfere with the Business Assets or the
operation of the Business or attempt any of the foregoing. Until the Closing
Date, the operations and affairs of Seller are the sole responsibility of Seller
and under Seller’s complete control. 
After the Closing Date, the operations and affairs of Buyer, including
the Business, are the sole responsibility of Buyer and under Buyer’s complete
control.


 


14.                                 IRGC Requests for Information. Buyer and Seller shall make available, upon
written request by the IRGC or any of its duly authorized representatives, the
contracts, books, documents and records that are necessary to ascertain the
nature and extent of the agreement between Buyer and Seller in connection with
the licensing of Buyer. To the extent that either party hereto receives such a
request, the other party hereto shall provide copies of such documents to the
other in order to respond to such request.


 


15.                                 Risk of Loss of Business Assets. Between the date of this Agreement and the
Closing Date, Seller assumes all risk of destruction, loss or damage to the
Business Assets due to fire or other casualty, and Seller, at Seller’s sole
expense, shall, until the Closing Date, keep all of the Business Assets fully
insured as presently maintained by Seller. If any of the Business Assets is
damaged by fire or other casualty, Buyer and Seller shall have the following
rights and obligations:


 


45
















 


(a)                                  If the damage is not substantial (as
hereinafter defined), Buyer shall take title to the Business Assets without
abatement of the Purchase Price and be entitled to receive the insurance
proceeds arising out of such damage to the extent Seller has not theretofore
used such proceeds to repair such damage.


 


(b)                                 If the damage is substantial (as hereinafter
defined), Buyer shall have the option of canceling this Agreement within sixty
(60) days of receiving notice of such damage, or Buyer may accept the Business
Assets and thereupon be entitled to receive the insurance proceeds arising out
of such damage (including, without limitation, business interruption insurance
proceeds to the extent the Business is interrupted after the Closing Date)
without abatement to the Purchase Price.


 


(c)                                  If damage occurs, then such damage shall be
deemed “substantial” if the same would materially interfere with the operation
of the gaming operations of the Business and cannot be substantially repaired
or restored within ninety (90) days after such damage occurs.


 


16.                                 Termination.


 


16.1                           Grounds for Termination. This Agreement may be terminated at any
time before the Closing Date:


 


(a)                                  By mutual written agreement of Buyer and
Seller;


 


(b)                                 By Seller if (i) Buyer fails to deliver
the Deposit  to the Deposit Holder by the
Effective Date, or (ii) Buyer voluntarily withdraws the Application, or
(iii) Buyer fails to file an Application with the IRGC within thirty (30)
days after the date of this Agreement;


 


(c)                                  By Seller or Buyer if Buyer has not obtained
IRGC approval of its Application (or in the event of a Withdrawal in Lieu of
Denial) by the Outside Closing Date;


 


(d)                                 By Seller or Buyer  in accordance with Section 4.4 hereof,
if Buyer has not obtained the MGC Approvals, or in the event of a Withdrawal in
Lieu of Denial with respect to the MGC Approvals (if Seller and Buyer have not
jointly waived the requirements of Section 36) by the Outside Closing
Date;


 


(e)                                  By Seller or Buyer if all HSR Approvals have
not been obtained by the Outside Closing Date;


 


46
















 


(f)                                    By Seller if any of the conditions set forth
in Section 9 is not satisfied and has not been waived by Seller;


 


(g)                                 By Buyer if any of the conditions set forth
in Section 8 is not satisfied and has not been waived by Buyer;


 


(h)                                 By Seller in the event of a material breach
of any provision of this Agreement by Buyer not cured within the applicable
cure period;


 


(i)                                     By Buyer in the event of a material breach of
any provision of this Agreement by Seller not cured within the applicable cure
period;


 


(j)                                     By Buyer in the event that any one or more of
the Environmental Investigations provided for in Section 7.9 discover
actual or potential environmental liabilities, or any condition or state of
affairs that would require remediation work to be carried out, in either case
at a cost, individually or in the aggregate, in excess of $150,000 but less
than $2,000,000, unless Seller agrees that Seller shall be solely responsible
for such liability or for carrying out such remediation work;


 


(k)                                  By Buyer in the event that any one or more of
the Environmental Investigations provided for in Section 7.9 discover
actual or potential environmental liabilities, or any condition or state of
affairs that would require remedial work to be carried out, in either case at a
cost, individually or in the aggregate, in excess of $2,000,000; or


 


(l)                                     By mutual agreement of Seller and Buyer if
the requirements of Section 36 of this Agreement cannot be satisfied.


 


16.2                           Automatic Termination. This Agreement shall automatically
terminate in the event that the transaction contemplated by this Agreement has
not closed by the Outside Closing Date, unless Seller and Buyer mutually agree
to any extension.


 


17.                                 Remedies. The following shall be the exclusive remedies of the parties hereto
in the event of a breach of this Agreement.


 


17.1                           Buyer’s Remedies. If (x) Seller materially breaches this
Agreement before the Closing Date which breach is not cured within thirty (30)
days after Seller receives written notice of such breach, (y)  any of the conditions set forth in
Section 8 to be satisfied by Seller at or prior to the Closing Date have
not been satisfied by Seller or waived by Buyer, or (z) 


 


47
















 


Buyer
has not obtained IRGC approval of its Application (or in the event of a
Withdrawal in Lieu of Denial) and the MGC Approvals (if Seller and Buyer have
not waived the requirements of Section 36) by the Outside Closing Date,
Buyer’s remedies shall be as follows: 
(i) Buyer may terminate this Agreement and recover the full amount
of the Deposit, or (ii) in the case of each of clauses (x) and (y) above,
Buyer may specifically enforce this Agreement, and in the case of each of
clauses (i) and (ii) Buyer shall have all other legal and equitable
remedies available to it.


 


17.2                           Seller’s Remedies.


 


(a)                                  In the event that Buyer fails to file its
Application with the IRGC within thirty (30) days after the execution of this
Agreement  then, and only in such events,
Seller may, as its sole remedy therefor, terminate this Agreement, and, demand
payment of the full amount of the Deposit.


 


(b)                                 If Buyer materially breaches this Agreement
before the Closing Date other than as specifically provided in
Section 17(a), which breach is not cured within thirty (30) days after
Buyer receives written notice of such breach, (i) Seller may terminate
this Agreement and demand payment of the full amount of the Deposit, and
(ii) Seller shall have all other legal and equitable remedies available to
it.


 


17.3                           Attorneys’ Fees. If a dispute arises with respect to this
Agreement, then the party prevailing in such dispute shall be entitled to
recover all expenses, including, without limitation, reasonable attorneys’ fees
and expenses, incurred in enforcing and/or defending such party’s rights under
this Agreement.


 


18.                                 Indemnification.


 


18.1                           Buyer’s Indemnification. For a period of eighteen (18) months after
the Closing Date or earlier termination of this Agreement, Buyer shall
indemnify, defend and hold harmless Seller and/or any of Seller’s officers,
directors, managers, employees, shareholders, or agents (including, but not
limited to, Seller’s financial advisor), from and against any and all
incidents, claims, demands, actions, causes of action, suits, obligations,
liabilities, losses, costs, damages or expenses, costs of investigation and
defense, counsel or attorneys’ fees, whether under retainer or salary or
otherwise, including, without limitation, interest, penalties and court costs
(collectively, “Damages”), suffered or incurred by Seller and/or any or all of
Seller’s officers, directors, managers, employees or agents, which directly or
indirectly


 


48
















 


arise,
result from or relate to (a) any breach of, or any failure by Buyer to perform,
any of Buyer’s representations, warranties, covenants or agreements contained
in this Agreement, (b) matters that occur or arise as a result of Buyer’s
action or failure to take action after the Closing Date, except as to such
incidents, claims, demands, actions, causes of action, suits, obligations,
liabilities, losses, costs, damages or expenses that are caused or claimed to
be caused by or are a result of the acts or omissions of Seller or Seller’s
respective agents or employees, (c) any and all claims of any kind and
description of employees that relate to their, hiring, employment and/or
termination by Buyer, provided that the facts or events giving rise to such
claims occurred after the Closing Date, (d) any and all debts, obligations and
liabilities of Seller specifically assumed by Buyer hereunder and any Damages
resulting from the operation of the Business by Buyer after the Closing Date,
(e) damage done by Buyer or Buyer’s representatives during the inspection and
due diligence of the Business, (f) the Assumed Obligations, and (g) any and all
claims made by any broker, finder or agent claiming a fee or commission through
Buyer. Notwithstanding any provision of this Section 18.1 to the contrary,
the obligations of Buyer to indemnify Seller for any and all debts, obligations
and liabilities of Seller arising from or related to any Assumed Obligations,
shall extend for the length of the remaining term of such agreements and shall
not be limited to claims made prior to the expiration of the eighteen (18)
month period following the Closing Date. If and to the extent Seller notifies
Buyer in writing of a claim for indemnification for any matter covered by
clause (a) above on or prior to the expiration of the eighteen (18) month
period after the Closing Date, Buyer shall continue to be obligated to provide
indemnification hereunder with respect to such claim until such time that such
claim is resolved and satisfied.


 


18.2                           Seller’s Indemnification.


 


18.2.1                  For
a period of eighteen (18) months after the Closing Date, Seller shall
indemnify, defend and hold harmless Buyer and/or any or all of their officers,
directors, managers, employees or agents (including, without limitation, its
financial advisor) (collectively a “Buyer Indemnitee”) from and against any and
all Damages suffered or incurred by Buyer and/or any or all of their officers,
directors, managers, employees or agents, which directly or indirectly arise,
result from or relate to (a) any breach of, or any failure by Seller to
perform, any of Seller’s representations, warranties, covenants or agreements
contained in this Agreement, (b) matters that occur or arise as a result of
action or failure to take action by Seller or any of Seller’s agents, employees
or stockholders before the Closing Date, and, to the extent of the obligations
in Sections 7.6 and 7.7, after the Closing Date, whether or not such
action or failure to take action constitutes a breach


 


49
















 


of
any provision of this Agreement, (c) any and all claims of any kind and
description of employees that relate to their hiring, employment and/or
termination by Seller, provided that the facts or events giving rise to such
claims occurred before the Closing , (d) any and all debts, obligations and
liabilities of Seller not specifically assumed by Buyer hereunder, including,
without limitation, the Excluded Obligations, (e) any and all claims made by
any broker, finder or agent claiming a fee or commission through Seller and
(f) the fraud or willful misconduct of Seller. Notwithstanding the
foregoing, (x) the indemnification obligations regarding litigation, fraud and
willful misconduct shall continue for the applicable statutes of limitation and
appeal periods related thereto,  (y) if
and to the extent Buyer notifies Seller in writing of a claim for
indemnification for any matter covered by clause (a) above on or prior to the
expiration of the eighteen (18) month period after the Closing Date, Seller
shall continue to be obligated to provide indemnification hereunder with
respect to such claim until such time that such claim is resolved and satisfied
and (z) the indemnification obligations regarding Section 5.1 shall
continue indefinitely.


 


18.2.2                  Seller
shall indemnify, defend, and hold harmless the Buyer Indemnitees from all of
the debts, liabilities and obligations of Seller not expressly assumed by Buyer
under this Agreement and all claims, suits, actions, losses, damages, costs and
expenses, including, without limitation, reasonable attorneys’ fees and
disbursements, arising therefrom or from any failure by Seller or the
shareholders of Seller to pay or discharge such liabilities and obligations
(including, without limitation, any Excluded Obligation) as and when they
become due.  The obligations of Seller to
indemnify Buyer for such debts, liabilities and obligations of Seller shall
extend for the length of the remaining term of such agreements and shall not be
limited to claims made prior to the expiration of the eighteen (18) month
period following the Closing Date.


 


18.3                           Limitations on Seller Indemnification. Notwithstanding any other provision hereof
or of any applicable law, the Buyer Indemnitees shall not be entitled to make a
claim as a result of a breach of representation, warranty or covenant which
survives the Closing pursuant to Section 5 hereof against Seller unless
such claim, together with all other claims of the Buyer Indemnitees  under Section 18.2.1 hereunder and under
the equivalent provisions of the St. Joseph Agreement and the Mark Twain Casino
Agreement (each as defined in Section 36), exceed in the aggregate
$200,000 (in which case only the excess over $200,000 of such Claims will be
paid); provided, however, that (i) such $200,000 minimum threshold with respect
to indemnifiable Damages shall not apply to any claim for indemnification made


 


50
















 


by
Buyer under this Agreement with respect to (w) the breach or inaccuracy of any
of the representations or warranties contained in Section 5.1
(Organization, Standing and Authority), Section 5.3 (Title), or
Section 5.4 (Litigation), (x) the gross negligence, willful misconduct or
fraud of Seller, (y) any Excluded Obligation, or (z) Seller’s indemnification
obligation pursuant to Section 18.2.2, (the items described in the
immediately preceding clauses (w), (x), (y) and (z), collectively, the “Seller
Retained Liabilities”), and (ii) except with respect to an indemnification
obligation in respect of a Seller Retained Liability, Seller’s indemnification
obligations for Damages under Section 18.2.1 of this Agreement (including,
without limitation, indemnification obligations with respect to environmental
claims under Section 5.11) shall not exceed, together with Seller’s
equivalent indemnification obligations under the St. Joseph Agreement and the
Mark Twain Casino Agreement, in the aggregate $14,375,000. The amount of any
indemnifiable Damages under Section 18.2.1 shall be reduced by any
insurance proceeds actually received with respect thereto (it being understood
that after the satisfaction in full of indemnifiable Damages hereunder, the
Buyer Indemnitees shall assign to Seller all of its rights to unpaid insurance
proceeds with respect to insurance coverage, but only to the extent applicable
to such Damages).


 


18.4                           Security for Seller Indemnity.                                      As security for the Seller Indemnity
obligations under this Agreement and under the St. Joseph Agreement and the
Mark Twain Casino Agreement) (the “Secured Indemnity Obligations”), the Seller
(and the sellers under the St. Joseph Agreement and the Mark Twain Casino
Agreement shall deposit with the Deposit Holder at the Closing hereunder (A)
the sum of Seven Million One Hundred Eighty Seven Thousand Five Hundred Dollars
($7,187,500.00) in cash (which cash shall be withheld by Deposit Holder
pro-rata from the proceeds otherwise payable to the Sellers under this
Agreement and the St. Joseph Agreement and the Mark Twain Casino Agreement) and
(B) an irrevocable letter of credit in the amount of Seven Million One Hundred
Eighty Seven Thousand Five Hundred Dollars ($7,187,500.00) (the “Seller Letter
of Credit”).  The Seller Letter of Credit
shall be issued by Bank of America, N.A., or a comparable bank or financial
institution acceptable to Buyer in its sole discretion.  The Letter of Credit shall be for a minimum
term of two (2) years (or one (1) year with a right to renew for a second year
and provisions allowing the Seller Letter of Credit to be drawn on if not
renewed within thirty (30) days prior to its expiration).  The Seller Letter of Credit shall provide
that it may be drawn upon by written notice from Deposit Holder.  Upon any draw on the Letter of Credit, all
proceeds therefrom shall be paid to Deposit Holder and held by Deposit Holder
in accordance with this Section 18.4 and the Indemnity Escrow Agreement.
All sums held by Deposit Holder hereunder shall invested by Deposit Holder in
interest-bearing accounts in federally insured institutions


 


51
















 


that
are selected by Seller and reasonably acceptable to Buyer (Buyer agreeing that
Bank of America, N.A. or Wells Fargo Bank, N.A. would be acceptable to
Buyer).  All sums of cash referred to in
this Section 18.4 and the Letter of Credit shall be held by the Deposit
Holder and distributed, as appropriate, in accordance with the terms of an
indemnity escrow agreement in, or substantially in, the form attached hereto as
Exhibit “E”
(the “Indemnity Escrow Agreement”), to be entered into on or prior to Closing
by the Deposit Holder (as escrow agent), Seller and Buyer.


 


(a)                                  On the date that is six (6) months after the
Closing, the aggregate amount of the Secured Indemnity Obligations shall be
reduced to 50% of its original amount, subject to and in accordance with the
provisions of the Indemnity Escrow Agreement.


 


(b)                                 On the date that is one (1) year after the
Closing, the aggregate amount of the Secured Indemnity Obligations shall be
further reduced to 25% of its original amount, subject to and in accordance
with the provisions of the Indemnity Escrow Agreement.


 


(c)                                  On the date that is eighteen (18) months
after the Closing, all remaining cash and the Seller Letter of Credit shall be
returned to  Seller, subject to an in
accordance with the Indemnity Escrow Agreement.


 


18.5                           Procedure
for Claims.


 


(a)                                  Any
person who desires to seek indemnification under any part of this
Section 18 (each, an “Indemnified Party”) shall give written notice in
reasonable detail (a “Claim Notice”) to each party responsible or alleged to be
responsible for indemnification hereunder (an “Indemnitor”)  and the Deposit Holder prior to any
applicable Expiration Date (as defined below). 
Such notice shall briefly explain the nature of the claim and the
parties known to be invoked, and shall specify the amount thereof.  If the matter to which a claim relates shall
not have been resolved as of the date of the Claim Notice, the Indemnified
Party shall estimate the amount of the claim in the Claim Notice, but also
specify therein that the claim has not yet been liquidated (an “Unliquidated
Claim”).  If an Indemnified Party gives a
Claim Notice for an Unliquidated Claim, the Indemnified Party shall also give a
second Claim Notice (the “Liquidated Claim Notice”) within 60 days after the
matter giving rise to the claim becomes finally resolved, and the second Claim
Notice shall specify the amount of the claim. 
Each Indemnitor to which a Claim Notice is given shall respond to any
Indemnified Party that has given a Claim Notice (a “Claim Response”) within 30
days (the “Response Period”) after the later of (i) the date that


 


52
















 


the Claim Notice
is given or (ii) if a Claim Notice is first given with respect to an
Unliquidated Claim, the date on which the Liquidated Claim Notice is
given.  Any Claim Response shall specify
whether or not the Indemnitor giving the Claim Response disputes the claim
described in the Claim Notice.  If any
Indemnitor fails to give a Claim Response within the Response Period, such
Indemnitor shall be deemed not to dispute the claim described in the related
Claim Notice.  If any Indemnitor elects
not to dispute a claim described in a Claim Notice, whether by failing to give
a timely Claim Response in accordance with the terms hereof or otherwise, then
the amount of such claim shall be conclusively deemed to be an obligation of
such Indemnitor.


 


(b)                                 If
any Indemnitor shall be obligated to indemnify an Indemnified Party pursuant to
this Section 18, such Indemnitor shall pay to such Indemnified Party the
amount to which such Indemnified Party shall be entitled within 15 business
days after the day on which such Indemnitor became so obligated to the
Indemnified Party.  If the Indemnified
Party is  Buyer or another  Buyer
Indemnitee, it shall seek payment solely from the funds escrowed in
accordance with Section 18.4 above. 
If any Indemnitor fails to pay all or part of any indemnification
obligation when due, then such Indemnitor shall also be obligated to pay to the
applicable Indemnified Party interest on the unpaid amount for each day during
which the obligation remains unpaid at an annual rate equal to the prime rate
plus 5%.


 


(c)                                  If,
during the Response Period, an Indemnified Party receives a Claim Response from
the Indemnitor, then for a period of 45 days (the “Resolution Period”) after
the Indemnified Party’s receipt of such Claim Response, the Indemnified Party
and the Indemnitor shall endeavor to resolve any dispute arising therefrom.  If such dispute is resolved by the parties
during the Resolution Period, the amount that the parties have specified as the
amount to be paid by the Indemnitor, if any, as settlement for such dispute
shall be conclusively deemed to be an obligation of such Indemnitor.


 


(d)                                 If
the Indemnified Party is a Buyer
Indemnitee, then within two business days from the date on which such Buyer Indemnitee became entitled to
such funds,  Buyer and  Seller shall
provide joint written instructions to the Escrow Agent as to (i) the amount of
funds, if any, to be dispersed from the Escrow Funds and (ii) instructions as
to the manner in which such funds shall be dispersed by the Escrow Agent.


 


18.6                           Claims
Period.  Any claim for
indemnification under this Section 18 shall be made by giving a Claim
Notice under Section 18.5 on or before the 
dates set forth in Section 18.1 as to indemnification by Buyer and
in Section 18.2.1 as to indemnification by Seller (in each case, the
“Expiration Date”). So long as an Indemnified Party gives a Claim Notice for an
Unliquidated Claim on or before the applicable Expiration Date, such
Indemnified Party shall be entitled to pursue its


 


53
















 


rights to
indemnification regardless of the date on which such Indemnified Party gives
the related Liquidated Claim Notice.


 


18.7                           Third
Party Claims.  An Indemnified Party
that desires to seek indemnification under any part of this Section 18
with respect to any actions, suits or other administrative or judicial
proceedings (each, an “Action”) that may be instituted by a third party shall
give each Indemnitor prompt written notice of a third party’s institution of
such Action.  After such notice, any
Indemnitor may, or if so requested by such Indemnified Party, any Indemnitor
shall, participate in such Action or assume the defense thereof, with counsel
satisfactory to such Indemnified Party; provided, however, that
such Indemnified Party shall have the right to participate at its own expense
in the defense of such Action; provided, further, that the
Indemnified Party shall not consent to the entry of any judgment or enter into
any settlement, except with the written consent of the Indemnitor (which
consent shall not be unreasonably withheld). 
Any failure to give prompt written notice under this Section 18.6
shall not bar an Indemnified Party’s right to claim indemnification under this
Section 18, except to the extent that an Indemnitor shall have been harmed
by such failure.


 


19.                                 Assignment; Third Parties; Binding Effect. Neither party hereto may assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party, provided, however, that Buyer may designate
a wholly owned subsidiary to take title to the Business Assets and to assume
the Assumed Obligations but Buyer shall not be relieved of any of its
obligations hereunder as a result.. Nothing contained in this Agreement,
express or implied, is intended to confer upon any person or entity, other than
the parties hereto and their successors in interest, any right or remedy under
or by reason of this Agreement unless so stated expressly herein to the
contrary. All covenants, agreements, representations and warranties of the
parties hereto contained herein shall be binding on and inure to the benefit of
Buyer and Seller and their successors and assigns.


 


20.                                 Expenses. Except as otherwise provided herein, Buyer and Seller shall bear all
of their own respective expenses, including, without limitation, counsel and
accountants’ fees, in connection with the transactions contemplated by this
Agreement.


 


21.                                 Notices. Any notice or communication to be given under the terms of this
Agreement (“Notice”) shall be in writing and shall be personally delivered or
sent by overnight delivery or registered or certified mail, return receipt
requested. Notice shall be effective (a) if personally delivered, when
delivered; (b) if by overnight delivery, on the day after delivery thereof to a
reputable overnight courier service; and (c) if mailed, at midnight on the third
business day after deposit in the mail, postage prepaid. Notices shall be
addressed as follows:


 


54
















 


	
  To
  Buyer at:

  	
   

  	
  Herbst
  Gaming Inc.

  
	
   

  	
   

  	
  5195
  Las Vegas Blvd.

  
	
   

  	
   

  	
  Las
  Vegas, Nevada 89119

  
	
   

  	
   

  	
  Attention:  Ed Herbst and Sean Higgins

  
	
   

  	
   

  	
   

  
	
  With
  a copy to:

  	
   

  	
  Gibson,
  Dunn & Crutcher LLP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  333
  South Grand Avenue

  
	
   

  	
   

  	
  Los
  Angeles, California 90071-3197

  
	
   

  	
   

  	
  Attention:  Peter Ziegler

  
	
   

  	
   

  	
   

  
	
  To
  Seller at:

  	
   

  	
  Southern
  Iowa Gaming, Co.

  
	
   

  	
   

  	
  777 Winners Circle

  
	
   

  	
   

  	
  St. Joseph, Missouri 64505

  
	
   

  	
   

  	
  Attention:  Bruce Schmitter and Larry Seckington

  
	
   

  	
   

  	
   

  
	
  With
  copy to:

  	
   

  	
  Howard
  Grace

  
	
   

  	
   

  	
  7575 North 16th Street

  
	
   

  	
   

  	
  Suite 1

  
	
   

  	
   

  	
  Phoenix, Arizona 85020

  
	
   

  	
   

  	
   

  
	
  And To:

  	
   

  	
  Tobin & Hoff, P.L.C.

  
	
   

  	
   

  	
  4250 North Drinkwater
  Boulevard

  
	
   

  	
   

  	
  Suite
  170

  
	
   

  	
   

  	
  Scottsdale,
  Arizona 85251

  
	
   

  	
   

  	
  Attention:
  Shawn Tobin

  



 


or
at such other address as either Buyer or Seller from time to time may designate
by Notice hereunder.


 


22.                                 Captions. The captions appearing at the commencement of the Sections hereof are
descriptive only and/or for convenience in 
reference to this Agreement and in no way whatsoever define, limit or
describe the scope or intent of this Agreement or in any way affect this
Agreement.


 


23.                                 Waivers and Amendments. The parties hereto may amend this Agreement
in any respect only by mutual written agreement. The waiver by either party
hereto of any breach of any term, covenant or condition of this Agreement shall
not be deemed a continuing waiver of such term, covenant or condition, or a
waiver of any subsequent breach of the same or any other term, covenant or
condition of this Agreement.


 


24.                                 Further Assurances. Each of the parties hereto shall cooperate
in the effectuation of the transactions contemplated hereby and shall execute
any and all


 


55
















 


additional
documents or take such additional actions as may be reasonably necessary or
appropriate for such purpose.


 


25.                                 Schedules and Exhibits. The Schedules and Exhibits described herein
form a part of this Agreement for contractual purposes. Schedules and Exhibits
may be separately bound and initialed by the parties hereto, and such Schedules
and Exhibits as referred to in this Agreement are incorporated in this
Agreement for all purposes. All Schedules and Exhibits referred to in this
Agreement are by reference specifically incorporated in this Agreement and are
made a part hereof as though set forth herein, whether or not attached hereto
at the time of execution of this Agreement.


 


26.                                 Severability. If any term, provision, covenant or
condition of this Agreement, or any application thereof, is held by a court of
competent jurisdiction to be invalid, void or unenforceable, then the remaining
provisions, covenants and conditions of this Agreement, and all applications
thereof, not held invalid, void or unenforceable, shall continue in full force
and effect and shall in no way be affected, impaired or invalidated thereby.


 


27.                                 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Iowa.


 


28.                                 Gender and Number. Whenever used in this Agreement and as
required by context, the masculine gender includes the feminine and/or neuter,
and the singular number includes the plural.


 


29.                                 Time is of the Essence. Time is of the essence of this Agreement
and in the performance and enforcement of each of the promises, covenants,
representations and warranties of Buyer and Seller contained herein. For the
purpose of computing any period of time prescribed herein or relating hereto,
the first day shall be excluded. If the period of time is six (6) days or more,
weekends and public holidays shall be included. An act required to be performed
on a day shall be performed at or before the close of business on such day. If
an act is required to be performed on a certain day, and such day is not a
regular business day, then the time of performance or measurement shall be
extended to and include the next regular business day.


 


30.                                 Entire and Sole Agreement. This Agreement, including all Schedules and
Exhibits hereto, and all documents and instruments to be delivered on or before
the Closing Date pursuant to its terms, constitutes the entire agreement
between the parties hereto and supersedes all agreements, representations,
warranties, statements, promises and understandings, whether oral or written,
with respect to the subject matter hereof. The parties hereto further
acknowledge and agree that, in entering into this Agreement and in delivering
the documents and instruments to be delivered on or before the Closing Date, the
parties hereto have not in any way relied, and shall not in


 


56
















 


any
way rely, on any oral agreement, representation, warranty, statement, agreement
in principle, promise or understanding not specifically set forth in this
Agreement, in the Schedules or Exhibits hereto or in such documents or
instruments.


 


31.                                 Publicity. Except as may be required in connection with the submissions or
approvals by the parties hereto to the IRGC or as otherwise required by law,
and except pursuant to the Financing Materials, before the Closing no party
hereto shall make or cause to be made any press release or public announcement
with respect to any of the transactions contemplated by this Agreement or the
execution of this Agreement, including without limitation any disclosure of the
Purchase Price payable hereunder, or otherwise communicate with any news media
with respect thereto without the prior written consent of the other party
hereto. If any such announcement is so required by law, then Buyer and Seller
shall cooperate as to the timing and contents of any such press release or
public announcement.


 


32.                                 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


 


33.                                 Authority. Each entity signing this Agreement, and each agent, officer,
director, manager or employee signing this Agreement on behalf of such an
entity, represents and warrants that this Agreement is duly authorized by and
binding on such entity.


 


34.                                 IRGC Approval. This Agreement is subject to the approval
of the IRGC. Approval of this Agreement by the IRGC shall not in any manner
constitute approval of Buyer’s application to operate an excursion gaming
riverboat from Osceola, Iowa


 


35.                                 Post Closing Insurance.  For
a period of five (5) years after the Closing hereunder, or until Buyer sells
the Business to an unrelated third party, Buyer shall maintain general
liability insurance on the Business from companies authorized to do business in
the State of Iowa with at least Best’s Financial Rating XIII and Best’s Policy
Holder Rating B+ with minimum limits per occurrence of $5,000,000 and shall
name Seller and its shareholders (collectively the “Indemnified Parties”) as
additional insureds on such policies, which policies shall provide primary
coverage for any losses suffered by the Indemnified Parties with respect to the
Business and/or the Business Assets.


 


36.                                 Simultaneous Closings.  The
obligations of the parties to close the transactions contemplated by this
Agreement are expressly conditioned upon Buyer simultaneously closing its
acquisitions of the assets of (A) St. Joseph Riverboat Partners, a
Missouri General Partnership, pursuant to that certain Asset Purchase and Sale
Agreement of even date herewith (the “St. Joseph Agreement”) and (B) Mark


 


57
















 


Twain
Casino, L.L.C., a Missouri limited liability company pursuant to that certain
Asset Purchase and Sale Agreement of even date herewith (the “Mark Twain Casino
Agreement”).  If for any reason this
Agreement and the acquisitions called for in the St. Joseph Agreement and the
Mark Twain Casino Agreement shall not have closed by the Outside Closing Date,
then this Agreement shall terminate unless Seller and Buyer mutually agree to
waive the requirement that the transactions close simultaneously.  Notwithstanding any other provision hereof,
if this Agreement is canceled by Buyer as a result of the failure to satisfy
the condition set forth in Section 8.10
or by Seller as a result of the failure to satisfy the condition set forth in Section 9.6 due to the failure
of the St. Joseph Agreement and the Mark Twain Casino Agreement to close
simultaneously with this Agreement, and the acquisitions called for in the St.
Joseph Agreement and the Mark Twain Casino Agreement failed to close for a
reason that would have permitted  the
sellers under the St. Joseph Agreement or the Mark Twain Casino Agreement to
retain the deposit made under the applicable other Agreement, then Seller shall
be entitled to receive and retain the Deposit made hereunder.


 


37.                                 Enforcement.  The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached.  Accordingly, each of
the parties shall be entitled to specific performance of the terms hereof,
including an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement, this
being in addition to any other remedy to which they are entitled at law or in
equity.  Each of the parties further hereby
waives any defense in any action for specific performance that a remedy at law
would be adequate.


 


38.                                 Proof of Financing.  Simultaneously with the
execution of this Agreement, Buyer shall deliver to Seller a copy of a
commitment from Lehman Brothers to Buyer committing to provide funding to the
Buyer in the aggregate amount of the Purchase Price hereunder and the Purchase
prices payable under the St. Joseph Agreement and the Mark Twain Casino
Agreement.


 


***Signature Page Follows***


 


58
















 


IN
WITNESS WHEREOF, Buyer and Seller have duly executed and delivered this
Agreement as of the date first written above.


 


	
  BUYER:

  	
  SELLER:

  
	
   

  	
   

  
	
  Herbst
  Gaming, Inc.,

  a Nevada corporation

  	
  Southern
  Iowa Gaming Co.,

  an Iowa Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/
  Edward J. Herbst

  	
   

  	
  By:

  	
   /s/
  Bruce Schmitter  

  	
   

  
	
   

  	
  Edward J. Herbst

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   Vice
  President

  	
   

  
	
  Its:

  	
   President

  	
   

  	
   

  	
   

  	
   

  
							



 
















 


EXHIBITS AND SCHEDULES


 


Exhibits


 


	
  Exhibit
  “A”

  	
   

  	
  Legal
  Description of Real Estate

  
	
   

  	
   

  	
   

  
	
  Exhibit
  “A-1”

  	
   

  	
  Map
  showing general location of Real Estate

  
	
   

  	
   

  	
   

  
	
  Exhibit
  “B”

  	
   

  	
  Deposit
  Escrow Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit
  “C”

  	
   

  	
  Assignment
  and Assumption Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit
  “D”

  	
   

  	
  Financial
  Statements

  
	
   

  	
   

  	
   

  
	
  Exhibit
  “E”

  	
   

  	
  Indemnity
  Escrow Agreement

  



 


Schedules:


 


	
  Schedule 1(e)

  	
   

  	
  List
  of Gaming Equipment

  
	
   

  	
   

  	
   

  
	
  Schedule 1(i)

  	
   

  	
  List
  of Contracts

  
	
   

  	
   

  	
   

  
	
  Schedule 2

  	
   

  	
  Excluded
  Assets

  
	
   

  	
   

  	
   

  
	
  Schedule 3.2

  	
   

  	
  Assumed
  Obligations

  
	
   

  	
   

  	
   

  
	
  Schedule 3.5.3

  	
   

  	
  Employee
  Benefits

  
	
   

  	
   

  	
   

  
	
  Schedule 5.4

  	
   

  	
  Litigation
  Matters

  
	
   

  	
   

  	
   

  
	
  Schedule 5.5

  	
   

  	
  Changes
  in Financial Condition since 12/31/03

  
	
   

  	
   

  	
   

  
	
  Schedule 5.8

  	
   

  	
  List
  of Tradenames, Trademarks, etc.

  
	
   

  	
   

  	
   

  
	
  Schedule 5.9

  	
   

  	
  Environmental
  Disclosures

  
	
   

  	
   

  	
   

  
	
  Schedule 5.11

  	
   

  	
  Seller
  Required Consents

  
	
   

  	
   

  	
   

  
	
  Schedule 5.13

  	
   

  	
  List
  of Options

  
	
   

  	
   

  	
   

  
	
  Schedule 5.14

  	
   

  	
  List
  of Affiliate Contracts

  
	
   

  	
   

  	
   

  
	
  Schedule 5.17

  	
   

  	
  List
  of Insurance Coverages

  



 


E&S-1
















 


	
  Schedule 5.18

  	
   

  	
  List
  of Required Permits

  
	
   

  	
   

  	
   

  
	
  Schedule 6.5

  	
   

  	
  Buyer
  Required Consents

  



 


E&S-2